Report on Responsibilities of the Board of Directors towards
the Financial Report

92

16.

Audit Committeeâ&#x20AC;&#x2122;s Report

93

17.

Financial Statements
17.1 Report and Financial Statements
For the years ended 31 December 2005 and 31 December 2004

95

17.2 Report and Interim Financial Statements
For the Three-Month and Six-Month Periods
30 June 2005 and 2004

130

Annual Report 2005

1. Vision, Mission, Quality Policy and Safety Policy
Company’s Vision
To be one of the world leading mass rapid transit operators with high quality of service.

Company’s Mission
We will provide mass transit services to the public with a safe, convenient, fast, reliable
and punctual metro system to alleviate traffic congestion, maintain the environment and improve
quality of life.

Quality Policy
The Company is committed to improving the quality of service as part of our goal to
become one of the world’s leading mass rapid transit operators. To succeed in the said vision, the
Company pledges to develop and implement quality management system in order to:
1. Provide rail mass rapid transit service that satisfies customer’s expectations with safe,
convenient, fast, reliable and punctual metro system;
2. Continually improve quality of service and business performance; and
3. Encourage employees to have the knowledge, competency and commitment to their
jobs needed to provide safety and quality service.
The satisfaction of customers is essential for our business. Our entire staff is committed to
improving quality so that we can better serve our customers and enhance our overall performance.

Safety Policy
Safety is the heart of our mass transit railway service. To ensure the safety of our
passengers, our contractors, and our own personnel, we are committed to making continuous
improvements in our safety management system in order to:
1. Keep all possible risks associated with the operation of the railway system as low as
reasonably practicable;
2. Ensure that all preventive and corrective measures designed to minimize such risks are
implemented efficiently and effectively; and
3. Raise safety knowledge and safety awareness among all those involved.
Safety is everyone’s responsibility. It is imperative that all our employees do everything
they can to maintain the highest standards of safety for the sake of our passengers, our contractors
and our own personnel.

1

Annual Report 2005

2. Financial Highlights
Consolidated Financial Statements
Bangkok Metro Public Company Limited and Its Subsidiaries
(Unit: Baht Million)
As at 31 December or for the years ended

2005

2004

2003

Total Assets

19,732

19,306

16,140

Total Liabilities

14,314

12,585

9,898

Total Shareholders’ Equity

5,417

6,721

6,242

Shareholders’ Equity (excluding minority interest)

5,411

6,699

6,242

990

443

-

Total Revenues

1,046

446

3

Net Profit (Loss)

(1,716)

(957)

(72)

(0.23)

(0.14)

(0.02)

0.74

0.92

0.97

7,347.12

7,030.49

4,791.13

7,350.00

7,250.00

6,404.84

Net Profit Margin (%)

(164)

(215)

(2,145)

Debt to Equity Ratio (times)

2.64

1.87

1.59

1.84

1.84

1.59

928

872

679

31 December

Fare Revenue

/1

Net Profit (Loss) per share /2 (Baht)
/3

Book Value per share (Baht)
Weighted average number of ordinary shares

/2

(million shares)
Number of ordinary shares at the end of period /2
(million shares)

Debt to Equity Ratio (times) /4
Number of Employees at the end of period

/5

(persons)
Notes:

/1

/2
/3
/4

/5

The Company started to generate fare revenue from the official commencement for service on July 3,
2004;
Adjusted to Baht 1.00 per share for comparison;
Calculated by excluding the minority interest;
Debt to Equity Ratio calculated pursuant to the conditions in the Onshore Facilities Agreement, based on
the figures from the Company’s unconsolidated financial statements by using total liabilities and
contingent liabilities net of the sponsor support: subordinated loan divided by the total of paid-up
capital, share premium, retained earnings (loss), reserves and sponsor support subordinated loan, but
excluding the any amounts attributable to revaluation of assets;
For the Company only, excluding the Subsidiaries.

3. Message from the Chairman of the Board of Directors
The overall Thai economic condition in the year 2005 has slowed down from the year 2004, in both
supply and demand, due to the impact of natural peril, a substantial increase in oil prices and the rise of
interest rates, as well as an increase in inflation rate during the second half of the year due to the floating
prices of oil and goods in the category of fresh food. However, the net capital inflow and international
reserve status rose and remained stable, and the unemployment rate was low.
The Company was granted a concession by the Mass Rapid Transit Authority of Thailand to
develop the M.R.T. Chaloem Ratchamongkhon Line Project (Hua Lamphong – Bang Sue) in respect of
investment in the M&E Equipment, operation and maintenance of the system for a period of 25 years.
Since 3 July 2004 until the present time, the Company has commenced the operation for approximately
more than one year. The M.R.T. Project not only plays a supporting role to raise the quality of life of
people in Bangkok, but also helps conserve the energy consumption for the country. Furthermore, the
Company is still committed to continuously improving the quality of its service provision. In the year 2005,
the Company achieved the goal in the quality management system by obtaining the international standard
certification of ISO 9001:2000 as audited and evaluated by RWTuW (TUV NORD) on
9 September 2005. In addition, the Company introduced its new services relating to the commercial
development, such as, opening retail shops in two stations, namely, Sukhumvit Station and Phahon Yothin
Station in September and December, respectively; rendering services of advertising media in the stations
and the trains; and providing automatic teller machine services in all 18 stations. All of such services are
aimed at promoting the quality of the service provision for the benefits of passengers and also enhancing the
Company’s revenue.
Over the past one year, Thai people have become more familiar with the use of the metro service, as
evidenced by the average number of passengers per day, which increased from 147,458 passengers per day
in the year 2004 to 163,403 passengers per day in the year 2005, or at an average of 151,255 passengers per
working day in the year 2004 increasing to 179,145 passengers per working day in the year 2005,
representing growth rates of 10.8 percent and 18.4 percent, respectively. The Company’s revenue from
such provision of service also increased from Baht 443 million in the year 2004 to Baht 990 million as a
result of an increase in the number of passengers and days of the provision of service for one full year.
Furthermore, in this year, the Company has earned additional revenue from commercial development
amounting to Baht 53 million. It is expected that in the future, the development of the areas along the metro
routes, including the public sector’s expansion of the mass transit railway system will be a factor driving a
continued increase in the Company’s revenue.

4

Annual Report 2005

In the year 2005, the Company has made several preparations for listing on the Stock Exchange of
Thailand, such as, increasing its registered capital from Baht 7,350 million to Baht 11,950 million to
accommodate the MRTA’s purchase of shares in the amount of Baht 2,987.50 million, or representing 25
percent of the registered capital, in accordance with the conditions of the Concession Agreement, and to
accommodate the pubic offering of shares for capital increase. In this regard, the Company has already
submitted an application form and filing documents for securities offering to the Office of the Securities
and Exchange Commission on 5 July 2005, and offered such shares for capital increase to its directors,
executives and staff in December 2005. The Company currently has the paid-up registered capital in the
amount of Baht 7,646.69 million.
In the year 2006, the Company targets to be listed on the Stock Exchange of Thailand so as to
accommodate the expansion and the capability development for the provision of service in the future
through investment in rolling stocks and the M&E Equipment to facilitate the provision of service and
accommodate the increased number of passengers in the future as well as strengthen its financial stability to
ensure the long-term growth.
As the Chairman of the Board of Directors of the Company, I would like to take this opportunity to
express my gratitude to all shareholders, the M.R.T. commuters, the MRTA, relevant government agencies
and private entities as well as financial institutions, which have been providing great support to the
Company’s operation, and all the Company’s staff who have been contributing and dedicating full
knowledge and capability to the Company’s operation, and we look forward to your continued support.

(Mr. Plew Trivisvavet)
Chairman of the Board of Directors

5

Annual Report 2005

4. The Board of Directors
As at 31 December 2005, the Board of Directors is as follows:

Mr. Plew Trivisvavet
Chairman of the Board of Directors
Chairman of the Executive Committee
Nomination and Remuneration Committee Member
Age: 60 years
Education:
-

First Executive Vice President, Executive President of the
Corporate Credit Group in the Metropolitan and Eastern
Region Credit Area, and Acting Executive President of the
Corporate Credit Group in the Metropolitan and Upper
Southern Region Credit Area,
Krung Thai Bank Public Company Limited

Krung Thai Bank Public Company Limited
TMB Bank Public Company Limited
Bank of Ayudhya Public Company Limited
Siam City Bank Public Company Limited

16

Annual Report 2005

7. Nature of Business
7.1 Background and Major Developments
Bangkok Metro Public Company Limited (the “Company”) was established on 18 February
1998, with an initial registered capital of Baht 1,000,000, having the CH. Karnchang Group as its
major shareholder, to participate in the bidding for the concession of the first underground mass
transit system project in Thailand, to carry out the design, manufacture, supply, installation, testing
and commission of the M&E Equipment for the operation and maintenance of the metro. In this
respect, the Company was granted the exclusive concession for such project approved by the
Council of Ministers on 28 March 2000 and 25 July 2000, respectively.
On 1 August 2000, the Company entered into the Agreement for the MRTA Initial System
Project – Chaloem Ratchamongkhon Line (the “Concession Agreement”) with the Mass Rapid
Transit Authority of Thailand (“MRTA”). The Company has the exclusive right to collect fares
and undertake activities and commercial development, including advertising and leasing space in
the project for a period of 25 years from the date of issuance by the MRTA of the Notice of No
Objection to commencement of revenue service, namely, on 2 July 2004, which would end on 1
July 2029. The official commencement of operations is on 3 July 2004. Under the Concession
Agreement, the Company is obliged to make payment of remuneration from fares and commercial
development to the MRTA at the rates as mentioned in the Concession Agreement.
On 16 January 2003, the Company was granted investment promotion privileges for the
M.R.T. Chaloem Ratchamongkhon Line (Blue Line) under Promotional Certificate No.
1029(1)/2546. The privileges include entitlement to 50% deduction of import duty on imported
machinery according to specified conditions and exemption from corporate income tax on net
profit from promoted operations for a period of 8 years commencing from the date of first earning
operating income (3 July 2004). The Company was converted to a public limited company on 11
May 2004. Their Majesties the King and Queen and HRH Princess Maha Chakri Sirindhorn
presided over the official opening ceremony of the M.R.T. Chaloem Ratchamongkhon Line (Hua
Lamphong – Bang Sue) on 3 July 2004. On 9 September 2005, the Company obtained an ISO
9001:2000 certification from RWTuW (TUV NORD).

17

Annual Report 2005

7.2 Business Overview
The Company’s revenue can be divided into two categories comprising revenue from
fares and revenue from commercial development.
•

Revenue from Fares
Revenue from fares is the Company’s major revenue. The fare collection by the Company

is subject to the number of stations traveled by passengers. The fare rates of the metro as of the
commencement date would be in accordance with the basic reference fare rates in force at the time
of the revenue service commencement date. Under the Concession Agreement, the basic reference
fare rates would be adjusted every 24 months based on the actual changes of the Bangkok NonFood Consumer Price Index compared to the basic reference fare rates as at 1 January 2002. At its
first year of service, the Company agreed to discount the fare rates by 15%.
•

Revenue from Commercial Development
Besides revenue from fares, the Company also generates revenue from commercial

development, which can be divided into two groups as follows:
1. The Company directly executed agreements with other companies by granting rights to
take the following actions:
-

Providing automatic teller machine service in all 18 stations to 8 commercial
banks;

-

Providing public telephone service to True Corporation Public Company
Limited; and

-

Supplying or producing advertising media on Platform Screen Doors in all 18
stations to How Come Media Company Limited.

2. The Company has granted the following rights to the Subsidiaries:
-

To procure still photo advertisement signboards to Triads Networks Company
Limited;

-

To manage retail spaces to Metro Mall Development Limited; and

-

To service and maintain telecommunications system equipment to BMCL
Network Limited.

In return, the Company shall receive a share of gross revenues, as well as dividends
from the Subsidiaries.
18

Annual Report 2005

Business Operations of the Subsidiaries
1.

Triads Networks Company Limited
Triads Networks Company Limited was established on 22 March 2002, with an initial

registered capital of Baht 15.00 million, to conduct the business of procuring and/or making
advertising boards or other forms in all 18 stations and for all 19 trains. Triads Networks
Company Limited started placing advertisements in the trains in June 2005 and in all stations in
July 2005.
2.

Metro Mall Development Limited
Metro Mall Development Limited was established on 9 February 2004, with an initial

registered capital of Baht 50 million, to conduct the business of leasing retail spaces in 11 stations
and spaces in the basement level of the Lat Phrao park and ride facility, representing a total
commercial leasing spaces of approximately 12,480 square metres (spaces for retail shops and
sale promotion), starting with Sukhumvit Station on 9 September 2005, Phahon Yothin Station on
16 December 2005.
3.

was established on 30 January 2004, with an initial registered capital of Baht 50 million, to
conduct the business of servicing and maintaining telecommunications system equipment in the
stations. At present, there is still no revenue from its operations.

Revenue Structure of the Companyâ&#x20AC;&#x2122;s Group
The Company had major revenue from fares since 3 July 2004. In June 2005, the Company started
to derive revenue from advertising services by Triads Networks Company Limited. Metro Mall
Development Limited started generating revenue from retail space leases in the third quarter of 2005.

Operated by

For the year
2004

(Unit: Million Baht)
For the year
2005

Shareholding
percentage of
the Company

Revenue

%

Revenue

%

Revenue from train
operations

The Company

-

443.14

99.39

990.39 /1

94.68

Revenue from
advertising services

Triads
Networks

56.00

-

-

37.63

3.60

Revenue from
telecommunications
system services

BMCL
Network

100.00

-

-

-

-

Revenue from retail
space leases

Metro Mall
Development

64.00

-

-

4.75

0.45

Interest income

The Company
and its
Subsidiaries

-

0.98

0.22

0.79

0.08

Other income /2

The Company
and its
Subsidiaries

-

1.76

0.39

12.44

1.19

445.88

100.00

1,046.00

100.00

Total
Notes:

/1

/2

This comprised revenue from fares of Baht 969.91 million and revenue from fare compensation of Baht
20.48 million from the MRTA, for the trial discount of fares from 7 January 2005 to 31 March 2005,
whereby the MRTA agreed to compensate the Company at 80% of the amount of actual daily revenue
below the amount of revenue set out in the memorandum of understanding.
Other income in 2004 comprised revenue from leasing training space to Siemens and revenue from space
leasing for public telephone service in the stations.
Other income in 2005 comprised revenue from space leases for ATM and public telephone services.

20

Annual Report 2005

7.3 Procurement of Products and Services
(1)

Management of the Metro Project
The Company has engaged Joint Venture CKET as the project manager for the M.R.T.

project to manage technical operations, such as, procurement of the M&E Equipment as ordered
from manufacturers and acting as agent for liaison with contractors and relevant authorities
regarding the installation of the M&E Equipment. Joint Venture CKET is a joint venture between
CH. Karnchang Public Company Limited and Expert Transport Company Limited (an affiliate of
the CH. Karnchang Public Company Limited Group, the major shareholder of the Company).
(2)

Procurement and Maintenance of the M&E Equipment
Given the fact that the Company had the duties under the Agreement for the MRTA Initial

System Project - Chaloem Ratchamongkhon Line, to design, manufacture, supply, install, test and
commission the M&E Equipment to ensure the readiness for the commencement of service to the
public, the Company thus engaged third parties to manufacture and procure the M&E Equipment
by way of turnkey contracts.

In essence, the manufacturer is responsible for the design,

manufacture and installation of the system ready for use, including training for every level of the
Company’s staff. The Company engaged Lincas and Siemens, one of the world’s largest modern
electric train manufacturers and developers of railway systems from Germany, to manufacture the
M&E Equipment.

Lincas and Siemens are responsible for the design, manufacture, supply,

installation, testing and commissioning of the M&E Equipment, comprising the rolling stocks,
power supply system, signaling and communication system, automatic fare collection, Platform
Screen Doors, maintenance equipment, signage and signals, as well as responsible for proposing
train operation plans, the Company’s management structure, a recruitment plan, and all
requirements relating to train operations by way of training for every level of the Company’s staff
to administer the train operation on their own. To ensure the confidence in the provision of
service, the Company has engaged Lincas and Siemens for maintaining the M&E Equipment for a
period of 10 years.
(3)

M&E Equipment and Components of the Metro
These can be divided into two parts: civil infrastructure operated by the MRTA, and the

M&E Equipment operated by the Company, as follows:

21

Annual Report 2005

Civil Infrastructure Operated by the MRTA
(3.1)

Stations
All stations of the metro are supported by reinforced concrete structures which are

15-25 metres beneath the road surface. Each station has different levels and areas depending
on the depth of the station. There are three kinds of platform, namely, central platform, side
platform, and stack platform. Each station has a control room for the control, observation and
monitoring of any malfunctions within the station.
(3.2)

Tunnels
Underground tunnels are supported by reinforced concrete structures designed to be

flexible and water-resistant. The inner diametre is 5.7 metres, thickness is 30 centimetres and
outer diametre is 6.30 metres. It is a two single tunnel system equipped with running rails,
power rails, maintenance walkways, a tunnel ventilation system, underplatform exhaust and
heat detector systems for the maximum safety for the train operations inside the tunnels.
(3.3)

Ventilation System
Stations and tunnels have a ventilation system installed with ventilation fans on

either side of the station and within the tunnel for the safety of passengers. Fans control the
temperature and condition inside the stations and tunnels.
(3.4)

Rails/Tracks
There are two types of tracks, running rails and power rails or third rails:
- Running rails are double rails with 1.435 metres width (standard gauge) railway
tracks are laid and directly fixed to the track base, which is made of a reinforced
concrete structure between Hua Lamphong and Bang Sue; railway sleepers are used
in the depot as is the case of the State Railway of Thailand.
- Power rails or third rails are laid parallel to either side of the running rails in order
to connect electricity from the source to the train, while the double running rails acts
as an electric conductor back to the source.

M&E Equipment Operated by the Company
(3.5)

Rolling Stocks
The Company has ordered 19 trains from Siemens, the worldâ&#x20AC;&#x2122;s leading electric train

manufacturer and assembler. The rolling stocks are made of robust and durable stainless steel

22

Annual Report 2005

with modern style and would have a service life of approximately 30 years. Each train
consists of three carriages with a total of approximately 70-metre long, and can carry up to
900 passengers with the transferring capacity of 40,000 passengers per hour per direction.
(3.6)

Signaling and Communication
A good signaling and communication system is necessary for safe, fast, reliable and

punctual train operations and is considered as an important factor of train management. The
control centre is located in the depot. Train operations are automatic computer system
supervised by engineers. In the stations, a radio communication system with direct phone
lines is used for officers to communicate so that passengers can immediately notify an
emergency. In case of any emergency to the officers, the automatic broadcasting system will
start to provide relevant information and direct the way out of the station.
(3.7)

Supervisory Control and Data Acquisition System (SCADA) and Closed Circuit
Television
Monitoring and supervision of the functions of the main equipment inside the

stations and tunnels, such as, the fire alarm system, cooling system, elevators and escalators,
power supply system within the station and power supply system for the locomotive system,
tunnel lighting system and ventilation system in the tunnels, are carried out by the SCADA
installed at the operation control centre. In case of any malfunction, an alarm will start
immediately to notify the officers in charge to rapidly and promptly check such system.
Closed circuit televisions are installed in various important spots inside the
stations to monitor for safety and playback to identify any incident. The closed circuit
televisions are also installed in the train operator cabin to monitor passengers entering and
leaving trains while docked at the stations to ensure safety before closing the doors.
(3.8)

Tickets are divided into two types: single journey tokens for a single trip, and
stored value cards, which are contactless smart cards for multiple journeys,
suitable for regular passengers.

2)

Token Vending Machines (TVM)
TVMs are located on the concourse level and issue only single journey tokens.

23

Annual Report 2005

3)

Ticketing Offices
Ticketing offices are manned by officers and equipped with machines for
issuing both tokens and stored value cards of all types.

4)

Automatic Gates
The system is referred as a â&#x20AC;&#x153;contactlessâ&#x20AC;? system. Passengers enter or exit the
system by using the ticket (token or stored value card) across the card readers
located on the top of the automatic gates within 10 centimetres, without any
contact required to open the gate.

(3.9)

Platform Screen Doors (PSD)
Glass PSDs spanning from the floor to the ceiling are installed along the length of

the platforms, between the platform and the train. This is for the safety of passengers while
entering and leaving the train so as to prevent any accident from passengers falling from the
platforms or injury from the train docking at the stations, as well as helping saving energy in
respect of the air-conditioning system and minimising noise pollution.
(3.10)

Power Supply
The power supply is designed in accordance with international standards for safety

and reliability in the supply of power to all electrical equipment, such as, sub-stations and
transformers, which are necessary for supplying power to the train and in the stations and the
tunnels. The system is designed based mainly on safety and continuity of services.
(3.11)

Depot Building and Central Control Centre
The depot consists of the depot building, operation control centre building, rolling

stock parking area, training centre and administration building and is located on a total area
of approximately 300 rai on Rama IX Road, close to the Thailand Cultural Centre Station,
owned by the MRTA while the Company has the right to use the same throughout the
Concession period.
The operation control centre is located in the same area as the depot. This centre is
the most important component of the operation control system, namely, to control and direct
every station and every train to ensure safe, rapid and punctual operations. In case of any
force majeure preventing the functioning of this operation control centre, another back-up
operation control centre located at the depot would control and direct the operation as normal.

24

Annual Report 2005

(4) Full Passenger Capacity of the M.R.T. Chaloem Ratchamongkhon Line
Table Indicating Full Passenger Capacity on the Metro
and Number of Passengers
in the years 2004 (July – December) and 2005 (January – December)
2004
July - December

January

February –
December /2

182

16

334

336,680

336,680

301,240

5,386,880

100,614,160

Number of Days of Service (Days) /1
Full Passenger Capacity Per Day (Persons)
Full Passenger Capacity of the Metro (Persons)
Number of Passengers (Persons)
Utilization Rate Per Full Passenger Capacity
Notes:

/1
/2

2005

61,275,760

106,001,040

26,837,376

57,191,054

43.80%

53.95%

The number of actual days of service in the year 2004 was 182 days and in the year 2005 was 350 days.
In the year 2004 – 17 January 2005, the Company had 19 trains in operation.
After the train collision accident on 17 January 2005, the Company suspended its service operation during
the period from 17 January 2005 – 31 January 2005, and resumed the service on 1 February 2005, with 17
trains in operation. The damaged two trains were under repair.

7.4 Industrial Conditions and Competition
In the year 2005, the growth rate of personal cars was affected by the continuous increase in
oil prices, which was a negative factor to personal car users and resulted in the decreased number
of newly registered personal cars, and the traffic congestion problems in Bangkok. These factors
encourage more people to use public transports, especially upon the development of a more
efficiently connected public transport network.
The transport system directly affecting the Company’s business includes personal cars,
passenger buses, microbuses and taxis. In the past several years, the fare rates for public transport,
especially, normal buses or air-conditioned buses, slightly changed. However, after the government
cancelled the oil price subsidy for benzene and diesel in the years 2004 and 2005, respectively, the
fare rates for public transports thus increased, which also resulted in the increase in traveling
expenses of personal car users.
Due to the said increase in the world’s oil prices, and the traffic congestion problems,
especially, during rush hours, together with the increase in fare rates, consumers’ demand for use
of the public transports, especially, the metro system also becomes increasing accordingly.

25

Annual Report 2005

Government Policy towards the Expansion of the Mass Transit System
The government by the Office of Transport and Traffic Policy and Planning (OTP) completed
the Urban Rail Transportation Master Plan (URMAP) in 2000 and conducted further study in the
practical implementation in 2004, referred to as URMAP2. The purpose of this program was to
reduce and alleviate the existing traffic problems, which would help improving the countryâ&#x20AC;&#x2122;s
economic and social conditions, as well as minimise the environmental problems. The government
sector has a policy to expand the urban rail transportation with the route networks as follows:

26

Annual Report 2005

27

Annual Report 2005

Mass Transit Project Development During the Period between 2005 and 2012
The time frame for implementation of the mass transit projects during 2005 â&#x20AC;&#x201C; 2012 under the
resolution passed by the Council of Ministers on 14 June 2005 for the government mega projects shall be
as follows:

Mass Transit Projects

Distance
(Kilometres)

Period

Target Year for
Service

1. Purple Line

43.00

1.1 Bang Yai - Bang Sue

23.00

2005 - 2009

2009

1.2 Bang Sue - Rat Burana

20.00

2005 - 2012

2012

2. Blue Line (Extension)

27.00

2.1 Hua Lamphong - Bang Khae

14.00

2005 - 2012

2012

2.2 Bang Sue - Tha Phra

13.00

2005 - 2010

2010

3. Orange Line

24.00

2005 - 2012

2012

4. Red Line

66.80

4.1 Rangsit - Bang Sue

24.60

2005 - 2008

2008

4.2 Bang Sue - Hua Lamphong

6.20

2005 - 2009

2009

4.3 Hua Lamphong - Maha Chai

36.00

2005 - 2009

2009

5. Light Red Line

71.41

5.1 Airport Link

28.00

2005 - 2007

2007

5.2 Extension of Airport Link

21.10

2005 - 2011

2011

5.3 Bang Sue - Taling Chan

14.71

2005 - 2008

2008

5.4 Bang Sue - Makkasan

7.60

2005 - 2009

2009

6. Dark Green Line

26.50

2005 - 2010

2010

7. Light Green Line

18.70

2005 - 2010

2010

Total

277.41

Notes:
1.
2.

The above information may be subject to change.
As at 17 December 2005, the Ministry of Transport announced its policy and plan to expand the M.R.T. Project
to 10 lines, with the yellow line, pink line and brown line as the expected additional 3 lines, but the details of the
said projects are currently pending the drafting of terms of reference (TOR), and further feasibility study in the
future.

28

Annual Report 2005

8. Risk Factors
8.1 Risks relating to businesses of the Company and its Subsidiaries
8.1.1

Risks relating to fare revenue
•

The number of passengers of the metro

The underground mass transit is a new form of the mass transit system in Thailand. In the early
stage of the service provision, people needed some time to be familiar with using such new service.
The number of passengers depends upon several factors including those beyond the Company’s
control, such as, fare rates, other available alternative transit systems, traffic congestion on roads, oil
prices, passenger transportation capacity, quality, as well as safety of the metro of the Company and
other mass transit systems.
•

The maximum fare rate is determined by the Concession Agreement

Under the Concession Agreement, the maximum fare rate to be charged by the Company is
determined in pursuance of a formula based on the Bangkok Metropolis Non-Food Consumer Price
Index, whereby the adjustment shall be made once in every two years, while the Company’s costs
would be likely to increase during the said period.
8.1.2

Risks relating to revenue from commercial development
The revenue from commercial development, which represents approximately 6% of the

Company’s total revenue, throughout the Concession period of 25 years, may vary subject to the
spending nature of customers and advertisers which depends on several factors beyond the Company’s
control, such as, the economic fluctuation, the competition in the advertising media business and space
leasing business for retailing, changes and amendment of laws and regulations governing such business
operation in the metro, as well as the progress in opening retail shops in the stations.
8.1.3

Risks relating to fluctuation of cost of fare
Cost of fare is deemed to be the main expenditure of the Company’s core business operation

which comprises maintenance costs for the metro (M&E contract and E&M contract), public utility
cost, and the staff’s salaries and welfare. In this regard, the maintenance costs under the M&E
contract, which has a 10 year term, may be adjusted subject to the consumer price index for Germany
in respect of the Euro-denominated payments, and to the consumer price index for Bangkok Metropolis
in respect of expenses for the Baht-denominated payments. In addition, the cost of electricity used at
stations and for train operations, which are the main costs of the public utility cost, may be adjusted
subject to the electricity cost rates of the Metropolitan Electricity Authority.

29

Annual Report 2005

8.1.4

The Company relies on Siemens and Lincas for manufacture and maintenance of its
M&E Equipment
The Company entered into an agreement for procurement and maintenance of the M&E

Equipment with Siemens and Lincas for a period of 10 years ending in 2014. Thus, in the event where
Siemens and Lincas are unable to provide such services to the Company or there is any change in the
maintenance agreement, the Company’s business operation may be adversely affected.
8.1.5

Risks from terrorism
Given the fact that in recent times, there have been terrorist attacks in many parts of the world,

such as, the terrorist attacks in the United States of America on 11 September 2001, the terrorist attacks
in London mass transit system, and the unrest circumstances in the southern part of Thailand, it is
possible that any one or several incidents stated above may lead to terrorist attacks in the mass transit
system in Thailand, which could affect the Company’s business operation despite the fact that the
Company has arranged an insurance against risks from such incidents.
8.1.6

Risks relating to the Concession Agreement and the government supervision
Given that the Company operates its businesses in accordance with the Concession Agreement

under the supervision of the MRTA, difference in the contractual parties’ interpretations on terms and
conditions of the Concession Agreement may arise. Should the Company and the MRTA cannot
resolve any conflicts, the Company may require a certain period of time to solve the problem, thereby
giving rise to an impact on the Company’s business operation.
8.1.7

Risks relating to the government policy in the construction and operation of the mass
transit railway system
The government has a policy to expand the mass transit railway system to cover the Bangkok

Metropolitan area and its vicinity with an accelerating plan for the construction of 10 train lines.
However, there is uncertainty in respect of procedures and period for implementation of the
government plan. In this regard, the Company’s growth also depends partly on such 10 train line
operation plan.
Furthermore, should the government have a policy requiring the Company to merge its business
with other mass transit systems in the future under various terms and conditions, the Company’s
business operation may be affected by such merger.

30

Annual Report 2005

8.2 Other risks
8.2.1

The Company is unable to pay dividend in the forthcoming period
Due to the fact that the MRTA Initial System Project requires quite large amount of investment

and continued use of working capital at the early stage of its operation, the Company still sustained
loss on its operation during such period and would not be able to pay dividend in the forthcoming
period.
8.2.2

Risks from the interest rate and foreign exchange rate fluctuations
As at 31 December 2005, the Company had long-term loans amounting to Baht 12,114.50 million

extended by domestic banks at the interest rates ranging from the minimum lending rate (MLR) to
MLR plus 0.25% - 0.50% per annum. The Company also had a loan amounting to Baht 1,403 million
extended by CH. Karnchang Public Company Limited, which is the Company’s major shareholder,
with the interest rate of MLR plus 0.50% per annum. In this regard, if the interest rates increase, the
Company’s interest expense obligation would be affected. In addition, the Company also incurred
expenses in foreign currencies for the maintenance cost of the M&E Equipment, in the amount of
approximately Euro 3.92 million per year and insurance premiums of approximately US$ 3.33 million
per year. Thus, should there be a depreciation of Baht value; the Company’s expenses would increase.
8.2.3

The Company relies on the financial support from its major shareholders
Under the conditions stipulated in the sponsor support agreement, two major shareholders,

namely, CH. Karnchang Public Company Limited and Natural Park Public Company Limited, are
required to provide financial support to the Company so as to maintain its liquidity in accordance with
the loan agreement executed with the financial institutions. In the event where the Company does not
receive the required financial support, the Company may be in default on the conditions of its existing
loan agreement, which would affect the Company’s financial condition and results of its operations.

31

Annual Report 2005

9. Capital Structure
9.1 Securities of the Company
As at 31 January 2006, the Company has the registered capital of Baht 7,646.69 million,
divided into 7,646.69 million ordinary shares, with par value of Baht 1.00, as well as Issued and Paidup Capital of Baht 7,646.69 million.

9.2 Shareholders of the Company
The table below shows the shareholders of the Company as at 31 January 2006.

Number of Shares

Name

Held (shares)

1. CH. Karnchang Public Company Limited Group;
- CH. Karnchang Public Company Limited

Mahasiri Siam Company Limited has a total of 9,000,000 shares, 7,747,788 shares of which or 86.09% is held
by the Trivisvavet Family, and 1,252,212 shares of which or 13.91% is held by other shareholders.

/2

Transit Expert Company Limited has a total of 10,000 shares, 9,993 shares of which or 99.93% is held by
Mahasiri Siam Company Limited, and 7 shares of which or 0.07% is held by other shareholders.

32

Annual Report 2005

9.3 Dividend Policy
The Board of Directors of the Company has a policy to pay dividends at the rate of
approximately 40% of its net profits after deduction of all reserves as required by law and as
required under the Onshore Facilities Agreement, in particular after reserving funds for the
repayment of the principal and interest for a period of six months. As the Company has incurred
losses during the initial years of revenue service and has had accumulated losses, it is thus not able
to pay dividends to its shareholders.
The Company’s Subsidiaries have policy to pay dividends at the rate of approximately
40% of net profits after deduction of all reserves as required by law and pursuant to the Loan
Agreement. The Board of Directors of the Company will consider and propose the dividend
payments to the Subsidiaries’ boards of directors for consideration and further submission to their
shareholders’ meetings for approval, provided that this will depend on the Subsidiaries’ investment
plans, requirements and other justifications which their boards of directors deem appropriate.

33

Annual Report 2005

10. Management Structure
10.1 Management Structure
The management structure of the Company comprises five committees, namely, the Board
of Directors, the Executive Committee, the Audit Committee, the Nomination and Remuneration
Committee, and the Risk Management Committee, as follows:

Nomination &
Remuneration
Committee

Board of Directors

Risk Management
Committee

Executive Committee

Office of the Managing
Director

Operations Division

A.

Audit Committee

Managing Director

Marketing and
Commercial
Development Division

Internal Audit Division

Accounting and
Finance Division

Human Resources and
Administration
Division

Board of Directors
As at 31 December 2005, the Board of Directors of the Company comprised 11 directors as

follows:
Name

Position

1.

Mr. Plew Trivisvavet

Chairman of the Board of Directors

2.

General Chetta Thanajaro

3.

Mr. Vitoon Tejatussanasoontorn

Audit Committee Member and Independent Director

4.

Lieutenant General Surat Sumrith

Audit Committee Member and Independent Director

5.

Mr. Supong Chayutsahakij

Director

6.

Mr. Somchai Sirilertpanich

Director

7.

Mrs. Vallapa Assakul

Director

8.

Mrs. Nongnutch Thienpaitoon

Director

9.

Dr. Sombat Kitjalaksana

Director

Chairman of the Audit Committee and Independent Director

10. Mr. Ronnachit Yaemsaard

Director

11. Mr. Anukool Tuntimas

Director

34

Annual Report 2005

Roles and Duties of the Board of Directors
(1)

to supervise, monitor and manage the Company’s operations to ensure compliance with laws as well
as the objectives and the Articles of Association of the Company and resolutions of the Company’s
meetings of shareholders and to protect the interests of the Company, based on principles of good
corporate governance as well as the rules and notifications of the Stock Exchange of Thailand and
the Securities and Exchange Commission of Thailand;

(2)

to set policies and strategies of the Company and to supervise, control and monitor to ensure that the
management performs in compliance with such policies in an efficient and effective manner to give
rise to the maximum economic value to the business and wealth to the shareholders;

(3)

to hold the Company’s annual ordinary general meeting of shareholders within no later than four
months from the end of the Company’s financial year and extraordinary general meetings of
shareholders when it deems necessary;

(4)

to hold the Company’s Board of Directors meetings quarterly, at which not less than 50% of the
total number of directors must attend the meeting to form a quorum. A majority vote is required for
any decision made at such a meeting and in the case of a tied vote, the chairman of the meeting will
have a casting vote;

(5)

to consider and approve the budget for the Company’s annual investment and operations, including
monitoring the utilisation of the Company’s resources;

(6)

to arrange for the preparation of proper, accurate and adequate financial and general significant
reports to the Company’s shareholders, including confirming the review and certification of the
information contained therein;

(7)

to establish an efficient and effective internal control system, internal audit system and risk
management measures, including regularly auditing such systems and measures;

(8)

to consider the appointment of any sub-committees or other persons to manage the Company’s
operations under the control of the Board of Directors of the Company, or to grant such authority to
such persons for such period of time as the Board of Directors of the Company deems appropriate,
provided that the Board of Directors of the Company may cancel, revoke, change or amend such
authorities as appropriate;

(9)

to consider the appointment of the authorised signatory directors of the Company, including the
appointment of sub-committees as may be necessary and appropriate to operate the Company;

(10)

to consider and clearly specify the division of roles, duties and responsibilities among the
Company’s Board of Directors, sub-committees and the management, including specifying the
procedures and regularly communicating such roles, duties and responsibilities to directors, subcommittee members, the management and staff of the Company;

(11)

to supervise and monitor the Executive Committee to ensure compliance with the policies specified
by the Board of Directors of the Company. The Executive Committee is authorised to approve any

35

Annual Report 2005

transaction that is binding on the Company worth up to Baht 50,000,000 (Baht fifty million),
excluding transactions which give rise to a conflict of interest with the Company and its Subsidiaries
pursuant to the notification of the Securities and Exchange Commission, including transactions
which require approval from the Companyâ&#x20AC;&#x2122;s shareholders in accordance with the notifications of the
Securities and Exchange Commission and the Stock Exchange of Thailand;
(12)

to consider and specify the power, duties and responsibilities, procedures for the appointment and
removal, disciplinary actions, salary, welfare benefits, bonus, gratuities and other remuneration,
including expenses and fringe benefits, of the Managing Director of the Company;

(13)

to consider and approve interim dividend payments to the Companyâ&#x20AC;&#x2122;s shareholders from time to
time as it deems appropriate and in accordance with the law;

(14)

to approve the issuance of financial instruments and any other securities by the Company, to specify
the number, price, date, procedures and conditions in respect of the underwriting of such securities
under the law and/or as specified by the meeting of the shareholders of the Company, including the
appointment of underwriters of such securities and underwriting agents.
Selection Procedures for the Directors
The Nomination and Remuneration Committee will consider selecting qualified persons to act

as directors and propose such persons to the Board of Directors for further submission to a meeting of the
shareholders or to the Board of Directors of the Company for appointment in accordance with the Articles
of Association of the Company:
The Board of Directors of the Company must comprise at least five directors, of which not less
than one-half must reside in Thailand. The directors must have the qualifications as specified by law and
be appointed by a meeting of shareholders of the Company in accordance with the following rules and
procedures:
1. Each shareholder shall be entitled to one vote per share;
2. Each shareholder must use all of the votes under paragraph 1 to appoint one or more
directors and may not divide such votes among candidates;
3. The number of votes received is ranked from highest to lowest and the directors will be
appointed from the highest to lowest according to the number of directors to be appointed
by the Company at that time. Any tied votes for the final vacancy shall be decided by a
drawing of lots.

Appointed as a director since 14 September 2004 until the Company received his resignation letter on 10
March 2005. The Company registered such resignation with the Ministry of Commerce on 23 March 2005.
He was re-elected as a director on 26 May 2005.
Appointed as a director since 26 May 2005.

37

Annual Report 2005

B.

Audit Committee
As at 31 December 2005, the Company’s Audit Committee comprised three members,

each of whom met the qualifications as specified by the Stock Exchange of Thailand, as follows:
Name
1. General Chetta Thanajaro

Position
Chairman of the Audit Committee

2. Mr. Vitoon Tejatussanasoontorn

Audit Committee Member

3. Lieutenant General Surat Sumrith

Audit Committee Member

Role and Duties of the Audit Committee
(1)

to ensure that the Company’s financial reports are accurate and adequate;

(2)

to ensure that the Company has suitable and efficient systems of internal control and internal
audit;

(3)

to consider, select, nominate, appoint and recommend remuneration for the Company’s
external auditors;

(4)

to ensure that the Company’s operations are full, adequate and appropriate in compliance with
securities and exchange law and regulations of the Stock Exchange, or laws, regulations,
articles and policies relating to the business of the Company;

(5)

to consider the disclosure of information by the Company, in the case of connected
transactions or transactions that may give rise to a conflict of interest, to ensure accuracy and
completeness;

(6)

to prepare a report on the monitoring activities of the Audit Committee and disclose the same
in the Company’s annual report, and have such Audit Committee’s report signed by the
Chairman of the Audit Committee;

(7)

to do any other act as prescribed by law or assigned by the Company’s Board of Directors
with the approval of the Audit Committee.
Selection Procedures for Independent Members of the Audit Committee
The Nomination and Remuneration Committee will select persons with suitable

qualifications as independent members of the Audit Committee and propose such persons to the
Board of Directors of the Company for further submission to a meeting of the shareholders or the
Board of Directors of the Company for appointment.

The Company shall have one Audit

Committee, comprising at least three independent directors appointed for a period of three years
each. The qualifications of the independent directors and Audit Committee members shall be in
accordance with the minimum requirements as prescribed in the notifications of the SEC and the

38

Annual Report 2005

Stock Exchange of Thailand and a meeting of the Board of Directors of the Company shall approve
the establishment of the Audit Committee.

C.

Executive Committee
As at 31 December 2005, the Company’s Executive Committee comprised four members, as

follows:
Name

Position

1. Mr. Plew Trivisvavet

Chairman of the Executive Committee

2. Dr. Sombat Kitjalaksana

Member of the Executive Committee

3. Mr. Supong Chayutsahakij

Member of the Executive Committee

4. Mr. Anukool Tuntimas

Member of the Executive Committee

Role and Duties of the Executive Committee
(1)

to set policies, appoint, specify authorities and their duties, supervise, monitor and liaise with,
working groups or special working groups or management groups, including considering and
approving any proposal by such working groups or special working groups or management
groups;

(2)

to approve any proposals by working groups or management groups or any working groups
for the benefits of the Company’s management and business operations under the objectives of
the Company;

(3)

to enter into transactions binding the Company worth up to Baht 50,000,000 (Baht fifty
million), but excluding transactions which give rise to a conflict of interests with the Company
or its Subsidiaries, pursuant to the notification of the Securities and Exchange Commission,
including transactions which require approvals from the Company’s shareholders in
accordance with the notifications of the Securities and Exchange Commission and the Stock
Exchange of Thailand. Such transactions include the following:
a. undertaking any juristic acts which bind the Company;
b. withdrawing from any bank account of the Company and applying credit with the
Company’s current banks or financial institutions, including the application to open
accounts and/or other forms of credit with any banks or financial institutions, as well as
using the Company’s securities as security for such debts, regardless of whether registered
or not;
c. undertaking joint investments on behalf of the Company with individuals, juristic persons,
other groups of persons under the law to proceed in accordance with the Company’s
objectives, including other forms of investments, such as, share acquisitions and share
swaps with other juristic persons, as it deems appropriate;
39

Annual Report 2005

d. undertaking feasibility studies of new projects as well as considering and approving
projects as it deems appropriate;
(4)

to specify, consider and approve articles, regulations, policies on the management and
business operations of the Company or any operation binding on the Company;

(5)

to give recommendations and advice and specify policies, powers and duties of the Managing
Director, working groups, special working groups and management groups;

(6)

to approve, appoint, employ, remove, impose disciplinary actions, fix salaries, welfare
benefits, bonuses, gratuities and other remuneration, including expenses and fringe benefits of
the officers or staff of the Company holding positions of department heads or higher,
including the Deputy Managing Director or equivalent or the working groups, special working
groups or management groups of the Company for specific purposes;

(7)

to perform any act as authorised by the Companyâ&#x20AC;&#x2122;s Board of Directors from time to time;

(8)

to appoint persons or groups of persons to manage the Company under the control of the
Executive Committee or to grant authority to such persons or groups of persons to do any acts
as the Executive Committee deems appropriate and to change, amend, cancel or revoke such
authorities;

(9)

to appoint the advisory chairperson or advisors or advisory committees to the Executive
Committee as it deems appropriate and to fix the remuneration, allowance, welfare benefits,
fringe benefits and other expenses of such appointees as appropriate;

(10) to call meetings of the Executive Committee and/or specify regulations and articles of such
meetings as the Executive Committee or the Chairman of the Executive Committee deems
appropriate;
(11) when the Chairman of the Executive Committee cannot perform the duties, the Chairman shall
appoint an acting Chairman to perform such duties on a case by case basis and such acting
Chairman will have the same power and duties as the Chairman of the Executive Committee;
(12) to consider and approve the authorities of the management of the Company according to the
rules, regulations and articles of the Company.
However, the Executive Committee does not have the power to approve any transactions or
matters in respect of which the Executive Committee or persons have a conflict of interest with the
Company or its Subsidiaries, pursuant to the notification of the Securities and Exchange
Commission.
Selection Procedures for the Executive Committee
The Board of Directors of the Company shall appoint the Executive Committee in
accordance with the Articles of Association of the Company, which provide that the Board of
Directors of the Company may appoint any other person to manage the Company under the control
40

Annual Report 2005

of the Board of Directors, provided that any such person who is to be a member of the Executive
Committee shall have the qualifications and capacity to perform their duties.

D.

Nomination and Remuneration Committee
As at 31 December 2005, the Nomination and Remuneration Committee of the Company

comprised three members as follows:
Name

Position

1. General Chetta Thanajaro

Chairman of the Nomination and Remuneration Committee

2. Mr. Plew Trivisvavet

Member of the Nomination and Remuneration Committee

3. Mr. Vitoon Tejatussanasoontorn

Member of the Nomination and Remuneration Committee

Role and Duties of the Nomination and Remuneration Committee
(1)

to consider the nomination of persons with suitable qualifications as directors and to propose
such persons to the Board of Directors for further submission to a meeting of the shareholders
of the Company or the Board of Directors of the Company for appointment;

(2)

to select a person suitable for the Managing Director position and propose such person to the
Board of Director of the Company for appointment;

(3)

to specify the rules for determination of remuneration of directors and the Managing Director;

(4)

to determine and to propose the directorsâ&#x20AC;&#x2122; remuneration to a meeting of the shareholders of
the Company for approval;

(5)

to propose the salary and adjustments and other remunerations of the Managing Director to
the Board of Directors of the Company for approval;

(6)

to undertake other matters as assigned by the Board of Directors of the Company.
Selection Procedures for the Nomination and Remuneration Committee
The Board of Directors of the Company shall appoint members of the Nomination and

Remuneration Committee who shall hold such office for a period of three years.

E. Risk Management Committee
As at 31 December 2005, the Risk Management Committee of the Company comprised four
members as follows:

41

Annual Report 2005

Name

Position

1. Mr. Supong Chayutsahakij

Chairman of the Risk Management Committee

2. Dr. Sombat Kitjalaksana

Member of the Risk Management Committee

3. Mr. Vitoon Hatairatana

Member of the Risk Management Committee

4. Miss Pornpimol Chirtchoochai

Member of the Risk Management Committee

Role and Duties of the Risk Management Committee
(1)

to consider and set the policies on risk management measures and plans for the operations of
the business and Subsidiaries;

(2)

to monitor and assess the appropriateness of the overall risk management system of the
Company;

(3)

to prepare recommendations to the Board of Directors of the Company in respect of risk
management, standard practice, strategy, risk assessment in each matter and of the Company
as a whole to ensure efficient and effective risk management;

(4)

to prepare risk reports for the Board of Directors of the Company;

(5)

to carry out other matters as assigned by the Board of Directors of the Company.

F. Management
As at 31 December 2005, the management of the Company comprised four members as follows:
Name

Position

1. Dr. Sombat Kitjalaksana

Managing Director and acting Marketing and
Commercial Development Director /1

Note:
/1
The Company is currently in the process of nominating Marketing and Commercial Development Director.

Role and Duties of the Managing Director
(1)

to control and monitor all businesses of the Company and to ensure compliance with
resolutions and policies of the Board of Directors and the Executive Committee of the
Company;

(2)

to approve, appoint, remove, employ, impose disciplinary actions, fix salary, bonus, gratuities,
welfare benefits and other remuneration, including expenses and fringe benefits for
management or staff with salary (exclusive of other remuneration) of up to Baht 200,000

42

Annual Report 2005

(Baht two hundred thousand) per month, holding positions below division heads (excluding
the Deputy Managing Director and division heads or equivalent), and the Managing Director
may delegate such power or duties to the working groups or the Board of Directors,
management group, group of persons or the management, as he deems appropriate;
(3)

to have the power to enter into any transaction, binding on the Company, worth up to Baht
2,000,000 (Baht two million) for each transaction;

(4)

to authorise the management of the Company, such as, the Deputy Managing Director,
Assistant Managing Director, the division heads or equivalent, to perform certain duties on
behalf of the Managing Director (such as, procurement, hiring and ordering payments) as he
deems appropriate;

(5)

to have the power to issue, amend, add, improve regulations, orders and work rules of the
Company, including employment, appointment, removal and disciplinary actions of staff and
employees, fixing of salaries and other remuneration, including gratuities and welfare benefits;

(6)

to have the duty to submit the balance sheet, financial statements and profit and loss accounts
to the Board of Directors of the Company for approval;

(7)

to undertake feasibility studies of new projects as well as consider and approve such projects
as assigned by the Executive Committee;

(8)

if the Managing Director cannot perform his duties, to appoint the Deputy Managing Director
or any other person to perform his duties on his behalf and such appointee shall have the same
power and duties as the Managing Director;

(9)

to appoint persons or groups of persons to manage the Company under the control of the
Managing Director or to grant such authority to such persons or groups of persons to do any
acts as the Managing Director deems appropriate, and to change, amend, cancel or revoke
such authority;

(10) to propose any matter to the Board of Directors, the Executive Committee, the Audit
Committee or meetings of the shareholders of the Company for consideration, approval or
other purposes as he deems appropriate;
(11) to do other acts as assigned by the Board of Directors or the Executive Committee of the
Company from time to time.
However, the managing director does not have the power to approve any transactions or
matters in respect of which the managing director or other persons may have a conflict of interest
with the Company or its Subsidiaries, pursuant to the notification of the Securities and Exchange
Commission.

43

Annual Report 2005

Selection Procedures for Management and Staff
-

The Managing Director will be appointed by the Board of Directors of the Company

through the nomination by the Nomination and Remuneration Committee;
-

Management at the level of division head or higher will be nominated, selected and

appointed by the Executive Committee;
-

Management whose salary does not exceed Baht 200,000 per month and holding a position

lower than division head will be nominated, selected and appointed by the Managing Director;
-

The selection, nomination and recruitment of positions lower than manager or equivalent

shall be carried out by the Human Resources and Administration Division which will make the
selection jointly with the relevant division in accordance with the Companyâ&#x20AC;&#x2122;s operation
regulations in relation to recruitment of personnel. They shall recruit and appoint persons with
knowledge, capacity and experience suitable to carry out their duties for the Company.
Selection of Directors and Management of Subsidiaries
The Subsidiaries of the Company, BMCL Network Limited, Metro Mall Development
Limited, and Triads Networks Company Limited, do not have their own nomination committees. The
selection of their directors is carried out by their shareholders and the selection of the management is
carried out by their respective boards of directors, provided that their directors and management are
suitably qualified without any prohibited characteristics under Section 68 of the Public Limited
Companies Act B.E. 2535 (1992).

44

Annual Report 2005

10.2 Remuneration of Management
10.2.1

Cash Remuneration

Remuneration of Directors of the Company (Only remuneration as directors and members of
the Audit Committee)
2005
Name of Director

-

Nature of
Remuneration
-

-

-

235,000

monthly

4. Mr. Supong Chayutsahakij /1

-

-

5. Mr. Anukool Tuntimas /1

-

-

6. Mr. Somchai Sirilertpanich /2

210,000

monthly

7. Mrs. Nongnutch Thienpaitoon /3

175,000

monthly

8. Mrs. Vallapa Assakul /3

180,000

monthly

-

-

430,000

monthly

-

-

275,000

monthly

-

-

275,000

monthly

Amount (Baht)

1. Mr. Plew Trivisvavet /1
2. Dr. Sombat Kitjalaksana

/1

3. Mr. Ronnachit Yaemsaard

9. General Chetta Thanajaro

/3

As Director
As Chairman of the Audit Committee
10. Mr. Vitoon Tejatussanasoontorn /3
As Director
As Audit Committee Member
11. Lieutenant General Surat Sumrith
As Director
As Audit Committee Member
Total

/2

1,780,000

Notes: Term of Office
/1

/2

/3

Remuneration was presented in the topic of Total Remuneration of the Executive Committee and
Executives
Appointed as a director since 14 September 2004 until the Company received his resignation letter on 10
March 2005. The Company registered such resignation with the Ministry of Commerce on 23 March
2005. He was re-elected as a director on 26 May 2005.
Appointed as a director since 26 May 2005.

45

Annual Report 2005

Total Remuneration of the Executive Directors and Management

2005
Name

Number of
Directors

Amount
(Baht)

Nature of Remuneration

Total remuneration
for executive
directors

3

2,530,000

monthly

Total remuneration
for management

4

16,112,345

salary, bonus, contributions to the
provident fund and social security fund

Other Remuneration
On 30 June 2005, the Extraordinary General Meeting of Shareholders No. 1/2005 resolved

to issue and offer 450,000,000 new capital increase shares to the directors, management and staff of
the Company (at the par value of Baht 1 each) and the Board of the Directors was authorised to
allocate these shares. During 26 - 28 December 2005, 296,689,300 shares were allocated to the
directors, management and staff of the Company.

The shares so allocated to the directors,

management and staff will be subject to a silent period for 2 years from the date the Company’s
shares start trading on the Stock Exchange of Thailand. The directors, management and staff will be
permitted to sell the shares at maximum of 50% of the locked-up shares every 12 months and 24
months thereafter from the date the Company’s shares start trading on the Stock Exchange of
Thailand.
Number of Shares in Bangkok Metro Public Company Limited held by the Directors and
Management
As at 31 January 2006
Number of Shares Held

Percentage of Shareholding
(%)

1. Mr. Plew Trivisvavet

20,000,000

0.26

2. Dr. Sombat Kitjalaksana

15,000,000

0.20

3. Mr. Ronnachit Yaemsaard

-

-

4. Mr. Supong Chayutsahakij

15,000,000

0.20

5. Mr. Anukool Tuntimas

15,000,000

0.20

6. Mr. Somchai Sirilertpanich

15,000,000

0.20

7. Mrs. Nongnutch Thienpaitoon

15,000,000

0.20

8. Mrs. Vallapa Assakul

15,000,000

0.20

Name of Director and Management

46

Annual Report 2005

9. General Chetta Thanajaro

15,000,000

0.20

10. Mr. Vitoon Tejatussanasoontorn

15,000,000

0.20

11. Lieutenant General Surat Sumrith

15,000,000

0.20

12. Mr. Witoon Hatairatana

10,000,000

0.13

13. Miss Pornpimol Chirtchoochai

10,000,000

0.13

14. Miss Sattabusya Mekvichai

10,000,000

0.13

10.3 Corporate Governance
The Board of Directors of the Company realises the significant of the corporate governance for
improving the transparency and responsibilities of the Board of Directors and management, and
increasing the confidence of shareholders, investors and other related parties. The Company thus sets
policies in support of good corporate governance, which contains the following fundamental
principles:
1. Corporate Governance Policy
(1) Equal and fair treatment to shareholders and other interested parties.
(2) The Board of Directors is determined to create value added to the Companyâ&#x20AC;&#x2122;s
business on a long-term basis and to manage the business of the Company with due
care and prudence, and to perform its duties with sufficient competency and
efficiency, in order to optimise the benefit to the shareholders, to avoid conflicts of
interest and to be responsible for their own decisions and management.
(3) Management shall be transparent, allow for inspection and adequate information
disclosure to all parties concerned.
(4) Management shall operate the business by considering risks that might arise in
relation to its business, and establishing appropriate risk control and management
procedures.
(5) The Company has set out a code of ethics for compliance by the directors and staff.
2. Shareholders: Rights and Equality
The Company recognises the rights of all shareholders to receive accurate, adequate and
complete information in due time to enable them to make decisions in shareholdersâ&#x20AC;&#x2122; meetings.
Prior to all shareholdersâ&#x20AC;&#x2122; meetings, the Company shall send a notice convening the meeting,
together with meeting agenda, to the shareholders and include an opinion from the Board of
Directors on each agenda. Such notice will be sent at least seven days prior to any such meeting.
The chairman of the meeting will allow the shareholders to inspect the operations of the Company
on an equal basis, enquire and give opinions and other suggestions, and shall record issues that

47

Annual Report 2005

have been discussed and important opinions in the minutes of the meeting so that the shareholders
will be able to examine such information. For shareholders who are not able to attend a meeting in
person, the Company will allow those shareholders to empower the Chairman of the Audit
Committee to attend the meeting and vote on their behalf.
3. Rights of Stakeholders
The Company realises the importance of rights of all stakeholders, both internal
stakeholders (that is, staff and management of the Company and its Subsidiaries), and external
stakeholders (that is, competitors, creditors, the government sector and other related agencies).
The Company realises that support from its stakeholders will create a competitive advantage and
profit for the Company, which will help it to achieve its long-term success.
4. Shareholdersâ&#x20AC;&#x2122; Meetings
To convene a shareholdersâ&#x20AC;&#x2122; meeting, the Company will choose an appropriate place and
time that is convenient to shareholders. Directors, including the Chairman of the Audit Committee
and the Chairman of the Executive Committee, will attend the meeting to answer any related
queries.
5. Leadership and Vision
The Companyâ&#x20AC;&#x2122;s Board of Directors shall have leadership skills, vision, knowledge,
competence and experience in various fields and be independent to make a decision in order to
optimise their contributions to the Company and the shareholders. The Board of Directors has
been involved in setting (or approving) vision, mission, strategy, objectives, business plan, and
budget of the Company and has also taken steps to supervise management in carrying out the
business plan and the budget efficiently and effectively in order to maximise the economic value of
the business and security for the shareholders.
6. Conflict of Interest
The Company recognises the significance of all transactions that may give rise to a conflict
of interest, or are related party transactions. The Company has clearly specified a policy and
regulations and procedures for considering and approving such transactions in accordance with the
law, including the regulations of the Securities and Exchange Commission and the Stock Exchange
of Thailand, and has complied with good corporate governance principles to prevent conflicts of
interests. The Company has also specified that any person who is connected to a transaction shall
be required to inform the Company of his/her connection to such transaction and shall not be
involved in any consideration or decision in relation to such transaction.

48

Annual Report 2005

Furthermore, the Company has a policy and procedures relating to the use of insider
information by management to prevent exploitation of insider information by management for
personal gain. The Company has arranged to educate executives on their duties to report securities
of the Company held by themselves or by their spouse and their minor children, including
informing them of the relevant penalties under the Securities and Exchange Act B.E. 2535 (1992).
Management are also required to report any changes in their securities holdings to the Securities
and Exchange Commission under the Securities and Exchange Act B.E. 2535 (1992). In addition,
the Company has prohibited management receiving insider information from taking any acts
violating the provisions of the Securities and Exchange Act B.E. 2535 (1992) and other related
laws.

The Company’s work rules prohibit the Company’s staff from disclosing confidential

information of the Company to any third party, or from unlawfully exploiting their positions for
the advantage of themselves or others. Any violation of such rules shall lead to disciplinary
actions and may result in the dismissal of employment. However, to date, there has never been any
such incident of exploitation of information for personal advantage.
7. Code of Ethics relating to the Operation of the Business
The Company has issued a code of ethics of the management and staff as guidelines for
such persons to perform their duties in accordance with the Company’s mission, with integrity and
fairness, including their treatment towards the Company, interested parties, the public, society, as
well as the government sector. The Company is in the process of conducting an annual survey of
the compliance with the said code of ethics.
8. Checks and Balances System for Directors who are not in the management
The Board of Directors consists of not more than 13 qualified persons, as follows:
-

5 directors who are in the management

-

4 independent directors

-

4 directors who are not in the management

The Company has four independent directors, representing approximately one-third of the
Board of Directors, as directors who are not in the management to provide checks and balances.
9. Combination or Separation of Positions
The Company plans to clearly separate the duties of the Company’s Board of Directors,
the Executive Committee and the Managing Director under the assigned scope of work and
authority. The authority, duties and responsibilities of the Executive Committee and the Managing
Director will be subject to the supervision by the Board of Directors. In addition, the Chairman of
49

Annual Report 2005

the Board of Directors shall not be the same person as the Managing Director, in order to separate
the setting of the corporate governance policy from the day-to-day management duties. The
Company has also appointed an Audit Committee which consists of three independent directors to
inspect the management of the Company.
10. Remuneration of Directors and Management
Directorsâ&#x20AC;&#x2122; Remuneration

: The Company has clearly and transparently set out its
policy on remuneration of directors and the Managing
Director. The remuneration of directors is at a comparable
level to the remuneration of directors in other similar
businesses, and at a sufficient and appropriate level for the
qualified positions of directors and the Managing Director.

Managementâ&#x20AC;&#x2122;s Remuneration : The remuneration of management, excluding the Managing
Director, follows the principle and policy as specified by
the Executive Committee, which also takes into account the
performance of the Company and of the management.
11. Meetings of the Board of Directors
The Board of Directors will convene a meeting at least once every three months and may
convene additional meetings as necessary. The agenda of the meetings will be clearly specified
prior to the meetings. The Company will also normally include in the agenda a section to
acknowledge the Companyâ&#x20AC;&#x2122;s performance. The Office of the Managing Director, which acts as the
secretary to the Company or the secretary to the Board of Directors, will, seven days prior to a
meeting, send the notice convening the meeting specifying the agenda, and will also send other
supporting documents three days prior to the meeting for the directors to have time to review the
documents before attending the meeting.
12. Sub-Committees
The Company has established three sub-committees, namely, the Audit Committee, the
Nomination and Remuneration Committee and the Risk Management Committee.
13. Internal Control and Audit Systems
The Company realises the significance of the arrangement for an internal control system.
The Company thus has a manual of written rules and regulations governing work performance,
with separation of duties and responsibilities for cross-checking purposes. The internal audit by

50

Annual Report 2005

the internal auditor can be independently performed and accurately reported, including the followup action and improvement of the internal auditorâ&#x20AC;&#x2122;s performance. The Company has five areas of
internal control, namely, organisation and environment; risk management; operational control of
management; information technology and communications system; and monitoring system.
Furthermore, the results from internal audits shall be reported by the Audit Committee,
which is appointed by the Board of Directors, at meetings of the Board of Directors. The Audit
Committee shall hold a meeting every quarter, prior to each meeting of the Board of Directors and
shall present the results of internal audits to the Board of Directors for its consideration.
14. Report of the Board of Directors
The Board of Directors realises the importance of reporting by indicating in its report on
the responsibilities of the Board of Directors towards the financial report in the annual report
following the auditorâ&#x20AC;&#x2122;s report.

In addition, financial data and general information, such as,

shareholding structure, risk factors, and connected transactions, shall be correctly disclosed to
shareholders and general investors in accordance with related laws and regulations.
15. Relationship with Investors
The Board of Directors realises the significance of the accuracy, completeness,
transparency and punctuality of information disclosure.

All of the financial data, results of

operations, and other related information, including important information that might affect price
of the Companyâ&#x20AC;&#x2122;s securities must be disclosed in accordance with the good corporate governance
principles. Such information shall be released as news, so that investors and other related person
can use the information for investment decisions, via the channels and media of the Stock
Exchange of Thailand and the Office of the Securities and Exchange Commission, including the
website of the Company (http://www.bangkokmetro.co.th). The Company has also established an
Investor Relations Department, which includes management and officers who are responsible for
public relations. For information, investors may contact Investor Relations Department at Tel.
0-2354-2000 ext. 3733-3735 or E-mail Address: ir@bangkokmetro.co.th.

10.4

Insider Information Supervision
The Company has set the following guidelines to prevent the use of insider information as

per the resolution of the Board of Directors Meeting No. 3/2005 held on 10 March 2005.

51

Annual Report 2005

10.4.1 General
As the Company is a public limited company incorporated under the Public Limited
Companies Act B.E. 2535 (1992) and is intending to have an initial public offering of its shares,
following the listing of its shares on the Stock Exchange of Thailand, any sale or purchase of the
Company’s securities by its management or staff based on material facts that may affect the
market price of the shares or securities, which have not yet been disclosed to public, and which
have been obtained by their duties or positions in the Company, would be considered as taking
advantage of third parties, and may be subject to a criminal penalty under the law.
Therefore, to prevent the Company’s staff and directors, including the Company itself,
from encountering any such illegal acts which may violate such law, as well as to comply with
good corporate governance guidelines of the Company, the Company’s Board of Directors has set
guidelines to prevent the use of insider information. Such guidelines will be revised from time to
time as appropriate and all directors, management and staff of the Company will strictly adhere to
these guidelines with accountability as well as causes and effects on a case by case basis. These
guidelines and policies will be more strict than the provisions of law, and will apply to directors,
management and staff, including related persons.
10.4.2 Securities Sale and Purchase Using Insider Information
Prohibited Persons
Persons who should not sell or purchase securities pursuant to the guidelines to prevent the
use of insider information are as follows:
(1) Directors and management of the Company;
(2) Directors and management of the Company’s Subsidiaries, including its affiliates;
(3) All staff of the Company and of the Company’s Subsidiaries;
(4) Spouses and minor children of the directors and staff; and
(5) Relatives who live with such persons above.
Prohibited Securities
Securities refer to shares, share warrants, convertible debentures and transferable
subscription rights issued by the Company.
General Practice
(1)

Prohibited persons as described above should not sell or purchase the securities under
any circumstances if they are aware or should be aware of material information that

52

Annual Report 2005

may affect the market price of the Company’s securities, which has not yet been
disclosed to the public.
(2)

Prohibited persons who are in possession of such material information due to their
duties and positions as the Company’s staff shall not disclose such information to any
other person while such information has not yet been disclosed to the public, unless it
is done in the performance of their duties in the Company.

Specific Guidelines
In addition to the general guidelines to prevent the use of insider information, Prohibited
Persons shall also follow the following guidelines:
(1)

Prohibited persons who are directly involved in the preparation of the Company’s
financial statements and balance sheet, are prohibited any purchase or sale from the
commencement of such preparation until the day immediately following the
disclosure date of such financial statements.

(2)

Any directors, management or staff who have received the draft financial statements
as referred to above, are prohibited from selling or purchasing the Company’s
securities from the day that they receive the draft financial statements until the
disclosure date of the financial statements.

(3)

Prohibited persons, who know or should have known that the Company will disclose
material information that may affect the market price of the Company’s securities,
are prohibited from selling or purchasing the Company’s securities from the day that
they know or should have known such information until the disclosure date of such
information.

10.4.3 Report of Prohibited Persons
A. Duty to Prepare Reports
(1)

Directors, managers or persons who hold management positions as specified in the
Securities and Exchange Act shall be required to prepare disclosure reports of their
initial securities holdings, and changes in such holdings, pursuant to the relevant
laws and regulations, together with such reports to the Company.

(2)

Officers in the position of division head or above shall report all acquisitions or
disposals of securities holdings equal to 5% or more of the total issued shares.

B. Reporting Procedures
(1)

Directors, managers or persons as specified in paragraph A. (1) above who have the
duty under law to disclose their securities holdings, their spouse’s securities

53

Annual Report 2005

holdings, and their minor children’s securities holdings to government agencies or
regulators shall submit copies of such reports to the Company on the same day.
(2)

Officers as specified in paragraph A. (2) shall disclose their securities holdings and
changes in their own securities holdings as per paragraph B. (1) as well as holdings
of their spouses and their minor children, to the Company within seven business
days from the date of change in title to the Securities.

10.5

Internal Control
On 24 May 2005, the Meeting of the Board of Directors No. 5/2005 was held to assess the

adequacy and suitability of the Company’s internal control system according to the internal control
evaluation guidelines as prescribed by the Office of the Securities and Exchange Commission.
Having inquired of the management, the Company concluded that the Company’s internal control
system is adequate with respect to the following 5 areas: organisation and environment; risk
management; operational control of management; information technology and communications
system; and monitoring system.
Organisation and Environment
The Company has an appropriate organisational structure that ensures the efficiency in
the operation of management. In addition, it has in place business goals and operational policies and
guidelines which are clear and assessible, and include written codes of conduct, to prevent potential
damage to assets of the Company and its Subsidiaries, including prevention of any misconduct by
the Company’s management and staff.
Risk Management
The Company has established a Risk Management Committee responsible for
managing, reviewing and maintaining the overall risk management system of the Company at an
appropriate level. The Committee provides suggestions to the Board of Directors in relation to risk
management policies, standard practice and strategy, and risk assessment in each matter and of the
Company as a whole to ensure efficient and effective risk management, as well as preparing risk
reports to the Board of Directors for acknowledgement.
Operational Control of Management
The Company clearly sets the scope of duties, responsibilities and transaction limits
for each level of management in writing. In addition, for any transactions with major shareholders,
directors, management or related parties, the Company has thorough guidelines in place to monitor
and prevent any conflicts of interests to optimise the Company’s interests, including regularly
54

Annual Report 2005

monitoring the operations of the Subsidiaries and establishing guidelines for the persons as
nominated and appointed as directors or management in the Subsidiaries to adhere thereto.
Information Technology and Communications System
The Company pays significant attention to its information technology and
communications systems to ensure that the Companyâ&#x20AC;&#x2122;s information is accurate, complete and
adequate for the decision-making by the management and the Board of Directors, and maintains a
system for storage of accounting records and all supporting documents in an organised manner, as
well as using generally accepted accounting principles as appropriate to the nature of the Companyâ&#x20AC;&#x2122;s
business.
Monitoring System
The Company regularly monitors the results of operations against the set targets. Any
material differences are reported to the Board of Directors/the Audit Committee for correction,
which shall then be regularly reported on the progress of the correction. In addition, the Company
also has policies in place for the management to immediately report to the Board of Directors any
fraud, violation of law and other misconducts which may materially affect the Companyâ&#x20AC;&#x2122;s reputation
and financial condition.

55

Annual Report 2005

11. Route Map of the M.R.T. Chaloem Ratchamongkhon Line Project

56

Annual Report 2005

12. Related Party Transactions
Transactions with persons who may have conflict of interest in the years 2004 and 2005.
Persons/Juristic
persons who may
have conflict of
interest

Relationship

1. CH. Karnchang - CH. Karnchang Public
Public Company Company Limited is a major
shareholder of the Company,
Limited
with 23.23% and 28.23% of
shares in the Company, as at
31 January 2005 and 31
January 2006, respectively.
- Mahasiri Siam Company
Limited is a major shareholder
of the Company, with 11.91%
of shares in the Company as at
31 January 2006, and with
22.25% of shares in CH.
Karnchang Public Company
Limited.
- Mr. Plew Trivisvavet, an
executive director and in the
management of CH.
Karnchang Public Company
Limited, is the Chairman of the
Board of Directors and the
Chairman of the Executive
Committee of the Company.
- Mr. Sombat Kitjalaksana, the
Managing Director of the
Company, and Mr. Anukool
Tuntimas, an executive director
of the Company, are also in the
management of CH.
Karnchang Public Company
Limited.

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

The Company
- Project Costs

10,446.71

- Costs of Fare

4,280.00

- Construction and Other
Payables
(These three transactions
are incurred from the
Companyâ&#x20AC;&#x2122;s hiring CH.
Karnchang Public Company
Limited to design and
construct a depot and to
maintain the existing civil
infrastructure work and the
depot.)

2,853.33

Necessity/Details

Year 2005

Opinions of the Audit
Committee

- CH. Karnchang Public
- The Company hired CH.
Company Limited is an
Karnchang Public Company
experienced and specialised
Limited
for
a
total
value
of
Baht
10,343.33
company in construction, and
900 million, to design and
was also responsible for the
construct
a
depot
on
22
January
13,196.67
2002, as amended on 30 July 2003. civil infrastructure work in
relation to this project from
The construction was 100%
Hua Lamphong Station to
completed. Moreover, the
Phra Ram 9 Station. The
Company hired CH. Karnchang
hiring was made in the form
Public Company Limited for a
of contract and payments are
total value of Baht 85 million, to
made according to the terms
maintain the existing civil
of the contract.
infrastructure work in the area of
the depot for 7 years from 1 March - Benaim (UK) Limited, an
engineering consultant of the
2004 to 28 February 2011.
Payments are made quarterly. The syndicated lenders, opined
that the construction and
Company recognises these
maintenance costs are
maintenance costs as cost of fare
reasonable.
after the commencement of
operations.
-

57

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest

Relationship

1. CH. Karnchang - CH. Karnchang Public
Public Company Company Limited is a major
shareholder of the Company,
Limited
with 23.23% and 28.23% of
(Continued)
shares in the Company, as at
31 January 2005 and 31
January 2006, respectively.
- Mahasiri Siam Company
Limited is a major shareholder
of the Company, with 11.91%
of shares in the Company as at
31 January 2006, and with
22.25% of shares in CH.
Karnchang Public Company
Limited.
- Mr. Plew Trivisvavet, an
executive director and in the
management of CH.
Karnchang Public Company
Limited, is the Chairman of the
Board of Directors and the
Chairman of the Executive
Committee of the Company.
- Mr. Sombat Kitjalaksana, the
Managing Director of the
Company, and Mr. Anukool
Tuntimas, an executive director
of the Company, are also in the
management of CH.
Karnchang Public Company
Limited.

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

The Company
- Amounts Due from Related
Parties
(relating to the Companyâ&#x20AC;&#x2122;s
sales of stored value cards)

- Administrative Expenses
(relating to the Companyâ&#x20AC;&#x2122;s
payment of costs of
installation of boards in the
train stations and additional
decorations around King
Rama V statue in front of
the Administration
Building)
- Construction and Other
Payables

Necessity/Details

Year 2005

Opinions of the Audit
Committee

360.00

92.72 - The Company sold stored value
- The transaction was
cards to CH. Karnchang Public
conducted in the ordinary
Company Limited and recognised
course of business and the
such sales as income when the
discount was at the same rated
cards were used.
as for general customers.

6.81

24.91 - The Company paid Baht 6,806.00 - These were an urgent works in
for the installation of boards in the respect of which CH.
train stations and Baht 24,909.60
Karnchang Public Company
for additional decorations around
Limited became familiar with
King Rama V statue in front of the the areas and was capable of
Administration Building.
coordinating and completing
the works in time.

-

-

58

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest

Relationship

1. CH. Karnchang - CH. Karnchang Public
Public Company Company Limited is a major
shareholder of the Company,
Limited
with 23.23% and 28.23% of
(Continued)
shares in the Company, as at
31 January 2005 and 31
January 2006, respectively.
- Mahasiri Siam Company
Limited is a major shareholder
of the Company, with 11.91%
of shares in the Company as at
31 January 2006, and with
22.25% of shares in CH.
Karnchang Public Company
Limited.
- Mr. Plew Trivisvavet, an
executive director and in the
management of CH.
Karnchang Public Company
Limited, is the Chairman of the
Board of Directors and the
Chairman of the Executive
Committee of the Company.
- Mr. Sombat Kitjalaksana, the
Managing Director of the
Company, and Mr. Anukool
Tuntimas, an executive director
of the Company, are also in the
management of CH.
Karnchang Public Company
Limited.

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

Year 2005

- Long-term Loans

-

- Accrued Interest

-

- Interest Expenses
(arising from the
Companyâ&#x20AC;&#x2122;s borrowing of
loans from CH. Karnchang
Public Company Limited to
the Company to finance the
Companyâ&#x20AC;&#x2122;s working capital,
as sponsor support)

-

- Short-term Loan

-

- Accrued Interest

-

- Interest Expenses

-

Necessity/Details

Opinions of the Audit
Committee

- The transactions are in
1,403,000.00 - The Company entered into
accordance with the Sponsor
subordinated loan agreements with
Support Agreement. The
35,752.81 CH. Karnchang Public Company
interest rate and terms of
Limited on 11 March 2005/27 May
payment are in accordance
35,752.81 2005/27 July 2005/25 August 2005/
with the conditions as
28 October 2005/30 November
specified by the syndicated
2005/23 December 2005 and 30
lenders
December 2005, for Baht 380.00
million/Baht 150.00 million/Baht
80.00 million/Baht 330.00
million/Baht 80.00 million/Baht
50.00 million/Baht 100.00 million
and Baht 233.00 million,
respectively, to finance the working
capital and to maintain the debt-toequity ratio at not exceeding 2:1
pursuant to the conditions as
specified by the syndicated lenders.
These loans were subordinated and
interest was charged at the rate of
MLR+0.5% per annum. The loans
are due and payable when there are
sufficient residual amounts after
provisioning for operating and
investing activities, and the
repayment of principal and interest,
including other reserves in
accordance with the conditions as
specified by the syndicated lenders.
- - The Company issued to CH.
Karnchang Public Company Limited
a short-term promissory note totaling
Baht 233 million, at the interest rate
of MLR+1.0% per annum.
However, the short-term loan was
3,050.25
converted to be a long-term loan on
30 December 2005.

59

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest

Relationship

1. CH. Karnchang - CH. Karnchang Public
Public Company Company Limited is a major
shareholder of the Company,
Limited
with 23.23% and 28.23% of
(Continued)
shares in the Company, as at
31 January 2005 and 31
January 2006, respectively.
- Mahasiri Siam Company
Limited is a major shareholder
of the Company, with 11.91%
of shares in the Company as at
31 January 2006, and with
22.25% of shares in CH.
Karnchang Public Company
Limited.
- Mr. Plew Trivisvavet, an
executive director and in the
management of CH.
Karnchang Public Company
Limited, is the Chairman of the
Board of Directors and the
Chairman of the Executive
Committee of the Company.
- Mr. Sombat Kitjalaksana, the
Managing Director of the
Company, and Mr. Anukool
Tuntimas, an executive director
of the Company, are also in the
management of CH.
Karnchang Public Company
Limited.

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

Year 2005

Necessity/Details

Opinions of the Audit
Committee

Metro Mall Development
Limited
- Project Construction Cost

198,976.65

- Construction Payables

190,817.36

- Advance Payment for
Construction

15,279.31

- Interest Expenses

4,183.29

- Accrued Interest
(arising from hiring CH.
Karnchang Public Company
Limited to carry out
construction)

4,183.29

18,243.42 - Metro Mall Development Limited - The contract was made with
hired CH. Karnchang Public
clear terms of payment.
206,179.66 Company Limited for a project
- CH. Karnchang Public
value of Baht 292.5 million to
Company Limited is an
construct the interior of the train
experienced and specialised
12,421.99
stations to support the lease of
company in this type of work
retail shops. However, Metro Mall and was also responsible for the
Development Limited has just
civil infrastructure work in
13,610.46 started to generate revenue from
relation to each train station.
commercial development, it is not
CH. Karnchang Public
17,203.16 yet able to pay the construction
Company Limited has
cost. CH. Karnchang Public
information of electric systems
Company Limited has charged
and civil work, which would
interest to Metro Mall
enhance the efficiency in
Development Limited at the rate of construction of such project.
MLR+1.0% per annum.
- A memorandum of agreement,
- Approval from the MRTA is
dated 3 June 2005, was
required for such construction, in
executed amending the original
relation to safety.
contract stipulating certain
conditions and the interest rate
arising from the delay in
payment by Metro Mall
Development Limited. The
interest rate charged by CH.
Karnchang Public Company
Limited is in line with the rate
that CH. Karnchang Public
Company Limited charges other
customers and close to the rate
that Metro Mall Development
Limited may borrow from
commercial banks.

60

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
2. CK. Office
Tower
Company
Limited

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- CK. Office Tower Company
Limited is an associated
company with common
directors.
- CK. Office Tower Company
Limited has interests in the
Company through its 6.88%
holding of shares in CH.
Karnchang Public Company
Limited.
- The major shareholders of CK.
Office Tower Company
Limited are Mahasiri Siam
Company Limited, the
Trivisvavet Family and Mr.
Anukool Tuntimas, holding
25%, 62.5% and 12.5% in CK.
Office Tower Company
Limited, respectively.
- Mr. Plew Trivisvavet, a
director of CK. Office Tower
Company Limited, is the
Chairman of the Board of
Directors and the Chairman of
the Executive Committee of
the Company.

The Company
- Administrative Expenses

- Accrued Expenses
(arising from the
disbursement of public
utilities expenses on behalf
of a Subsidiary)

Metro Mall Development
Limited
- Selling and Administrative
Expenses
- Construction and Other
Payables
(arising from rental of office
space and public utilities
expenses)

Necessity/Details

Year 2005

29.64

-

1,307.62
13.97

-

-

Opinions of the Audit
Committee

- The Company paid for public
- The public utilities rate
utilities expenses on behalf of a
charged by CK. Office Tower
Subsidiary, namely, BMCL
Company Limited to the
Network Limited, which rented
Company is close to the rate
office space after the Companyâ&#x20AC;&#x2122;s
charged to general customers.
lease expired. The Company has
These transactions ended
already received payments in full.
since the Company moved to
a new office.

1,774.84 - Metro Mall Development Limited - This rental rate is comparable
entered into an office space lease
to the rental rates charged by
and service agreement on the 1st
the lessor to third party
floor, covering a total area of
lessees, which range Baht
349.63 square metres, for a period
270-370 per square metre.
of 3 years, from 1 February 2004
until 31 January 2007. The rental
and service charge rate is Baht 340
per square metre per month.

61

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
2. CK. Office
Tower
Company
Limited
(Continued)

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- CK. Office Tower Company
Limited is an associated
company with common
directors.
- CK. Office Tower Company
Limited has interests in the
Company through its 6.88%
holding of shares in CH.
Karnchang Public Company
Limited.
- The major shareholders of CK.
Office Tower Company
Limited are Mahasiri Siam
Company Limited, the
Trivisvavet Family and Mr.
Anukool Tuntimas, holding
25%, 62.5% and 12.5% in CK.
Office Tower Company
Limited, respectively.
- Mr. Plew Trivisvavet, a
director of CK. Office Tower
Company Limited, is the
Chairman of the Board of
Directors and the Chairman of
the Executive Committee of
the Company.

BMCL Network Limited
- Selling and Administrative
Expenses

- Construction and Other
Payables
(arising from rental of office
space and public utilities
expenses)
Triads Networks Company
Limited
- Selling and Administrative
Expenses
- Construction and Other
Payables
(arising from rental of office
space and public utilities
expenses)

2,396.56

259.07

969.69
1,531.24

Year 2005

Necessity/Details

Opinions of the Audit
Committee

2,968.28 - BMCL Network Limited entered - This rental rate is comparable
into an office space lease and
to the rental rates charged by
service agreement on the 12th
the lessor to other lessees.
floor, covering a total area of
248.13 651.24 square metres, for a period
of 3 years, from 16 January 2004
until 15 January 2007. The rental
rate and service charge is Baht 320
per square metre per month.

1,857.21 - Triads Networks Company
- This rental rate is comparable
Limited entered into an office
to the rental rates charged by
the lessor to other lessees.
1,299.11 space lease and service agreement
on the 9th floor, covering a total
area of 461.76 square metres, for a
period of 3 years, from 1 June
2004 until 31 May 2007. The
rental and service charge rate is
Baht 300 per square metre per
month.

62

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
3. Joint Venture
CKET

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- Joint Venture CKET is an
associated company.
- Joint Venture CKET is a joint
venture between CH.
Karnchang Public Company
Limited and Expert Transport
Company Limited at 80% and
20%, respectively.
- CH. Karnchang Public
Company Limited holds
28.23% of shares in the
Company.
- Mahasiri Siam Company
Limited, a major shareholder
of the Company, holds 90% of
shares in Expert Transport
Company Limited.
- Mr. Plew Trivisvavet, a
director of Joint Venture
CKET, is the Chairman of the
Board of Directors and the
Chairman of the Executive
Committee of the Company.

Year 2005

The Company
- Project Costs

99,991.50

- Costs of Fare

42,800.00

- Construction and Other
Payables
(arising from project
management fees)

- Selling and Administrative
Expenses
- Construction and Other
Payables
(arising from the
preparation of the opening
ceremony areas)

Necessity/Details

8,560.00

185.04
-

Opinions of the Audit
Committee

- The Company hired Joint Venture - The transactions are in
accordance with the
CKET, for a total value of Baht
conditions of the Concession
62,060.00 2,275.22 million, as project
Agreement which requires the
manager to oversee the design,
Company to appoint CH.
70,620.00 procurement, installation and
testing of the M&E Equipment and Karnchang Public Company
Limited, an affiliated
the train operations, and to
company, or any other party,
continually oversee such activities
as project manager, subject to
for a period of the first 5 years
approval from the MRTA.
after the commencement of the
train services. The contract term - The transactions are in the
will expire in July 2009. Payments ordinary course of business
with payments made pursuant
are due and payable monthly. The
to the terms of the relevant
Company recognises these
ongoing costs as costs of fare after contract.
- Joint Venture CKET has both
the commencement of revenue
Thai and foreign teams with
service.
experience and expertise in
engineering works, contract
documents, which ensure that
all contractors of the
Company shall comply with
the contract.
- - The Company hired Joint Venture - The hiring of Joint Venture
CKET to prepare areas for the
CKET was urgent, and Joint
opening ceremony of the metro
Venture CKET, as project
system.
manager, was familiar with
the relevant areas.
-

63

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
3. Joint Venture
CKET
(Continued)

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- Joint Venture CKET is an
The Company
associated company.
- Selling and Administrative
- Joint Venture CKET is a joint
Expenses
venture between CH.
- Construction and Other
Karnchang Public Company
Payables
Limited and Expert Transport
(arising from the
Company Limited at 80% and
disbursement of electricity
20%, respectively.
costs)
- CH. Karnchang Public
Company Limited holds
28.23% of shares in the
Company.
- Mahasiri Siam Company
Limited, a major shareholder
of the Company, holds 90% of
shares in Expert Transport
Company Limited.
- Mr. Plew Trivisvavet, a
director of Joint Venture
CKET, is the Chairman of the
Board of Directors and the
Chairman of the Executive
Committee of the Company.

Necessity/Details

Year 2005

130.03

-

130.03

-

Opinions of the Audit
Committee

- The said transaction is
- Joint Venture CKET made
reasonable to prevent impact
advance payments for electricity
on the Companyâ&#x20AC;&#x2122;s business
used at the stations before the
operations.
commencement of the train
operations in the amount of Baht - The electricity costs
demanded by Joint Venture
130,027.25. As the stations have
CKET are the same as the
many electricity meters, it has not
been concluded as to which meters amount billed by the
Metropolitan Electricity
will be under the responsibility of
Authority to the Company.
the MRTA and which will be
Therefore, the transaction is
under the responsibility of the
considered reasonable and
Company. Therefore, Joint
fair.
Venture CKET made advance
payments for electricity to avoid
the Metropolitan Electricity
Authority disconnecting the
electricity service. At present, the
Company paid such electricity
costs, as such costs are considered
as expenses of the Company. The
entity responsible for the costs of
electricity recorded in each of the
meters has been clearly identified.
All electricity meters are the
property of the MRTA.

64

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
4. Expert
Transport
Company
Limited

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- Expert Transport Company
The Company
Limited is an associated
- Administrative Expenses
company with common
- Construction and Other
directors.
Payables
- Mahasiri Siam Company
(arising from vehicle leases)
Limited , which is major
shareholders of the Company
and CH. Karnchang Public
Company Limited, hold 90%
of shares in Expert Transport
Company Limited, the
remaining 8.02% is held by the
Trivisvavet Family.
- Mr. Plew Trivisvavet, a
director of Expert Transport
Company Limited, is the
Chairman of the Board of
Directors and the Chairman of
the Executive Committee of
the Company.

754.35
-

Necessity/Details

Year 2005

-

Opinions of the Audit
Committee

- The Company rented 2 office cars - The rental rates and terms of
for its 2 management staff at the
the rent are comparable to the
rates comparable to the market
market rates.
rates.
- After the Company had purchased
office cars, the car rents were
terminated since December 2004.

65

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
5. Joint Venture
BCKT

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- Joint Venture BCKT is an
associated company with
common directors.
- CH. Karnchang Public
Company Limited, a major
shareholder of the Company,
holds 25% of shares in Joint
Venture BCKT.
- Mr. Plew Trivisvavet, a
director of Joint Venture
BCKT, is the Chairman of the
Board of Directors and the
Chairman of the Executive
Committee of the Company.

- The rental rate is comparable
- The Company entered into an
office building lease agreement for to the market rates. However,
the employment conditions
an independent engineer under the
were terminated, therefore, the
employment conditions, with an
transaction has ended.
approximate area of 200 sq.m. at
the rental rate of Baht 25,500 per
month, ending in September 2004.
Before commencement of the
services, the rental was recorded as
project costs and will be
recognised as administrative
expenses after the commencement
of the services.
- The Company demanded payment - Such transaction is necessary
and reasonable as it relates to
for installation of the Emergency
the SCADA system, which is
Egress Signage and Door
important for the safety of the
Monitoring which the Company
system. This is also in
carried out such work in lieu of
Joint Venture BCKT, as contractor accordance with the
memorandum of agreement
for the civil infrastructure of the
among Joint Venture BCKT,
MRTA. The installation of the
the MRTA and the Company.
said equipment should have been
The costs of installation and
completed in accordance with the
the terms of the transaction
contract. However, such work
are in line with the agreement
must be linked with the SCADA
system of the Company, therefore, among the three related
parties. The terms of payment
the Company must proceed with
are as set out in the
such work concurrently with the
memorandum of agreement.
installation of the Companyâ&#x20AC;&#x2122;s
system and collect such expenses
from Joint Venture BCKT, which
have been settled.

66

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
6. Krung Thai
Bank Public
Company
Limited

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- In 2004, Krung Thai Bank
Public Company Limited held
10.00% of shares in the
Company. In 2005, Krung
Thai Bank Public Company
Limited reduced its
shareholding proportion to
9.86% and, at present,
shareholding proportion of
Krung Thai Bank Public
Company Limited is 9.48%.
- Mrs. Nongnutch Thienpaitoon,
an executive of Krung Thai
Bank Public Company
Limited, is a director of the
Company.

The Company
- Accounts Payable: Longterm Loans
- Accrued Interest

Year 2005

4,657,868.85

-

- Interest Expenses

143,348.48

- Project Costs
(Interest Expenses)

127,177.62

- Bank Fees
- Net Accounts Receivable under Forward Contract

11,310.17

Necessity/Details

Opinions of the Audit
Committee

4,735,658.05 - The Company entered into the
- The terms are in the ordinary
Onshore Facilities Agreement with course of business under
four Thai commercial banks,
which commercial banks lend
Krung
Thai
Bank
Public
Company
to general large-sized
Limited, TMB Bank Public
businesses.
Company Limited, Bank of
296,366.24 Ayudhya Public Company Limited
and Siam City Bank Public
Company Limited, for the total
amount of Baht 12,150 million to
pay for the relevant project costs
and the procurement of the M&E
146.40 Equipment under the Concession
Agreement.
- - The Company executed a foreign - This is a transaction in the
exchange forward contract with
ordinary course of business.
the lending banks to prevent
The prescribed exchange rate
foreign exchange risks in
is comparable to the market
connection with the payment for
rates.
procurement of the M&E
Equipment. At present, the said
contract has terminated.

67

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
6. Krung Thai
Bank Public
Company
Limited
(Continued)

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- In 2004, Krung Thai Bank
The Company
Public Company Limited held - Project Costs
10.00% of shares in the
(Guarantee Fee)
Company. In 2005, Krung
Thai Bank Public Company
- Letter of Guarantee Fees
Limited reduced its
shareholding proportion to
9.86% and, at present,
shareholding proportion of
Krung Thai Bank Public
Company Limited is 9.48%.
- Mrs. Nongnutch Thienpaitoon,
an executive of Krung Thai
Bank Public Company
Limited, is a director of the
Company.
- Project Costs
- Bank Fees

Necessity/Details

Year 2005

215.70

-

4,280.00
-

Opinions of the Audit
Committee

- The Company has letters of
- The terms are in the ordinary
guarantee issued by Krung Thai
course of business for the
Bank Public Company Limited
same nature of transactions.
163.99 remaining in the name of the
Company as security, in favor of
the Metropolitan Electricity
Authority for the installation of
electric meters at the electricity
sub-stations around the depot and
the Administration Building. The
bank fees are at the rate of 1.5%
per annum.
-

-

- The Company appointed Krung
- The fees are based on the
Thai Bank Public Company
ordinary terms applied by the
4,280.00 Limited as the Facility Agent
commercial banks in respect
according to the terms of the
of major clients.
Onshore Facilities Agreement.
The Company is required to pay
fees at the rate specified in the fee
letter as executed on the same date
of the Onshore Facilities
Agreement with the four financial
institutions.

68

Annual Report 2005

Persons/Juristic
persons who may
have conflict of
interest
6. Krung Thai
Bank Public
Company
Limited
(Continued)

Relationship

Nature of Transaction

Transaction Value
(Thousand Baht)
Year 2004

- In 2004, Krung Thai Bank
The Company
Public Company Limited held - Commercial Development
10.00% of shares in the
Revenue
Company. In 2005, Krung
Thai Bank Public Company
Limited reduced its
shareholding proportion to
9.86% and, at present,
shareholding proportion of
Krung Thai Bank Public
Company Limited is 9.48%.
- Mrs. Nongnutch Thienpaitoon,
an executive of Krung Thai
Bank Public Company
Limited, is a director of the
Company.

Year 2005

-

Necessity/Details

Opinions of the Audit
Committee

1,292.00 - Krung Thai Bank Public Company - This is a transaction in the
ordinary course of business.
Limited leased spaces for 17
automatic teller machines (ATMs) The prescribed rental rate is at
the same rate as applied to
from 11 March 2005 - 31 May
other customers.
2008 at the rental rate of Baht
12,000 per month per machine.
There was a one-time installation
fee of Baht 10,000 per machine
which was the same rate and
subject to the same terms as
general customers.

69

Annual Report 2005

Necessity and Justification of the Related Party Transactions
At the Meeting of the Board of Directors No. 5/2005 on 24 May 2005, the Audit Committee
jointly considered and reviewed the related party transactions, with the Company’s management, and
opined that the transactions between the Company and persons or juristic persons who may have a
conflict of interest were justified and necessary for the Company’s business operations.
Measures or Steps for the Approval of Related Party Transactions
The Company complied with the rules and regulations of the Securities and Exchange
Commission and the Stock Exchange of Thailand. In the case where the Company is entering into a
related party transaction that may give rise to a conflict of interest, such a transaction must be approved
by the Board of Directors and the Audit Committee would consider the justification of the transaction
whilst taking into account the best interests of the Company. The determination of price and terms of
the transaction must be based on the ordinary course of business and must be a fair price or be
comparable to the market price. Furthermore, any person who has any interest or who may have a
conflict of interest in connection with such transaction shall not be allowed to participate in the
consideration and approval of such transaction.
A related party transaction that is necessary and urgent with a transaction value of not exceeding
Baht 100,000 or, if more than one transaction, in aggregate of not exceeding Baht 2,000,000 within a
12-month period, may be carried out, provided that a report on each transaction must be made to the
Audit Committee, indicating its necessity and justification of the transaction.
Policy or Future Trend of Related Party Transactions
The Company shall comply with the rules and regulations of the Securities and Exchange
Commission and the Stock Exchange of Thailand, including the rules on the disclosure of related party
transactions as well as acquisition and disposition of assets of the Company or its Subsidiaries and the
accounting standards as prescribed by the Federation of the Accounting Professions. If there are
transactions which may give rise to conflict of interest in the future, such as, hiring a group of persons
who may have conflict of interest to carry out construction, project management, project maintenance,
the Board of Directors, with the Audit Committee, shall consider the necessity and justification of such
transactions, including the determination of price and terms of the transactions, which must be based on
the ordinary course of business. The price must also be compared with the price applicable to third
parties or the market price. A person who has any interest shall not be allowed to participate in the
consideration and approval of the transactions. The Company has no policy to extend or guarantee a
loan for a person who may have a conflict of interest under the definition of the SEC.
In case that the Audit Committee does not have expertise to consider any particular related party
transaction which may take place, the Company shall arrange for an independent expert or the
Company’s auditor to opine on such related party transaction to support the decision-making of the
Board of Directors and/or the Audit Committee or the shareholders, as the case may be. The Company
will disclose the related party transactions in the notes to the financial statements that have been
reviewed or audited by the Company’s auditor.

70

Annual Report 2005

13. Financial Condition and Results of Operations
13.1

Overview of the Results of Past Operations

The Company was awarded the Concession for the first underground mass transit system project in
Thailand for a Concession period of 25 years in relation to the M.R.T. Chaloem Ratchamongkhon Line
(Blue Line), which is the main route for the railway mass transit system connecting the north-west, north,
north-east and east of Bangkok to the city centre, and commenced its commercial services on 3 July 2004.
The Company has been responsible for the design, manufacture, supply, installation, testing,
commissioning and maintenance of the MRTA Initial System. The Company has been exclusively entitled
to collect fares and to operate commercial development activities, including advertising and leasing of
retail areas in the stations. Under the Concession Agreement, the Company is obliged to pay remuneration
to the MRTA at the rates as specified in the Agreement, comprising remuneration from fare revenue and
remuneration from commercial development. At the end of the Concession Agreement, the Company is
required to hand over the title to the M&E Equipment, including the depot and administration building, to
the MRTA according to the AOT (Acquire, Operate and Transfer) basis. The Company has licensed its
Subsidiaries to operate the main parts of its commercial development activities: (i) Metro Mall
Development Limited to manage the retail areas; (ii) Triads Networks Company Limited to operate
advertisements; and (iii) BMCL Network Limited to service and maintain equipment for
telecommunications systems. The Company will receive remuneration in the form of a percentage of its
Subsidiariesâ&#x20AC;&#x2122; revenue before expenses and dividend income from its Subsidiaries.
The Company started the operation on 3 July 2004, and generated fare revenue and total revenue of
Baht 443.15 million and Baht 445.88 million, respectively, for the year 2004. For the year 2005, the
Company generated fare revenue and total revenue of Baht 990.39 million and 1,046.00 million,
respectively. The average daily passengers in 2005 (calculated from a total of 350 days of service)
amounted to 163,403 passengers, representing an increase from 147,458 passengers for the year 2004
(calculated from 3 July to 31 December 2004, a total of 182 days of service), or representing an increase of
10.81% from 2004.
Costs and expenses of the Company before the service commencement date related mostly to
project development, such as, management and consultant fees, design costs, electrical and mechanical
work and rolling stock, interest expenses and financial costs. These were capitalised as project costs and
amortised according to the number of passengers throughout the Concession period. The Company uses
the Unit of Throughput Amortization Method which complied with Thai GAAP and used by other
companies, such as, Bangkok Expressway Public Company Limited, Bangkok Mass Transit Public
Company Limited and The Eurotunnel, a train service provider in Europe. The Units of Throughput
Amortization Method takes into account the ratio between the actual number of passengers in each period,
71

Annual Report 2005

and the number of passengers in such period plus the forecasted number of passengers for the remaining
Concession period. The project cost amortisation will increase as the number of passengers increases
which will also result in an increase in fare revenue. The Company has a policy to regularly review the
forecasted number of passengers, particularly, in the event that the actual number of passengers differs
from the forecast by more than 20%. As the Company is in an early stage of operation, the initial revenue
of the Company may remain low as target passengers have been going through a period of behavior
adjustment and it would take some time for them to become familiar with the metro commute, which is a
rather new form of mass transit for Thailand.

In addition, during the initial stage of service

commencement, the Company used a marketing strategy that included a fare reduction in order to attract
potential passengers, thereby rendering the Companyâ&#x20AC;&#x2122;s revenue during the initial years to gradually
increase. Since the Companyâ&#x20AC;&#x2122;s costs mainly comprised fixed costs, particularly, maintenance cost and
amortisation of the project cost, the Company and its Subsidiaries incurred net losses for the years 2003,
2004 and 2005 of Baht 72.49 million, Baht 957.21 million, and Baht 1,715.99 million, respectively.
Nevertheless, the Company is confident that the number of passengers on the M.R.T. Chaloem
Ratchamongkhon Line will increase continuously. This is evident from the increase in the average daily
passengers during the recent period due to the traffic congestion problems and the increase in oil prices. If
the other railway mass transit system projects in Bangkok which are being accelerated by the government
sector are completed, such event would well serve as a key factor to feed more passengers to the M.R.T.
Chaloem Ratchamongkhon Line, which will cause the number of passengers on the Companyâ&#x20AC;&#x2122;s Chaloem
Ratchamongkhon Line to increase rapidly. Moreover, the Company has started to generate revenue from
commercial development since the third quarter of 2005, amounting to Baht 53.34 million for the Company
and its Subsidiaries in the year 2005. The expenses of the Company relating to commercial development
are not high as it uses the existing infrastructure to generate additional revenue. The Company is therefore
confident that the results of its operations will improve in the future.
With respect to the train collision accident at the Thailand Cultural Center Station on 17 January
2005, the damage to the station area and various systems have been repaired and tested by experts in the
Company, the MRTA and other relevant organisations to ensure the safety of the operation. The metro
service resumed on 1 February 2005. A repair to the damaged trains is expected to be completed in
October 2006. With respect to the damage to the trains and the systems at the station, the Company is
responsible for deductible of US$ 250,000 or approximately Baht 10.00 million which has been realised in
full as an expense during the period from January to September 2005. The expenses relating to the
accident over and above this amount are covered by the insurance companies. Medical expenses and other
compensation to injured passengers had been paid by the insurance companies.

72

Annual Report 2005

13.2

Analysis of Results of Operations

In analysing the results of operations of the Company and its Subsidiaries, as the Company started
to generate revenue from its operation since 3 July 2004, and for comparison purposes, the analysis will be
divided into two periods. The first period is for the first half of 2005 (1 January – 30 June 2005) compared
with the performance for the year 2004 (1 January – 31 December 2004), and the second period is for the
second half of 2005 (1 July – 31 December 2005) compared with the first half of 2005 (1 January – 30 June
2005). This comparison period was based on an equal six month operation.
Total Revenue
Total revenue of the Company and its Subsidiaries comprises fare revenue, fare compensation
revenue, revenue from commercial development and other income. Total revenue of the Company and its
Subsidiaries for the first six months of 2005 was Baht 402.04 million, representing a decrease from Baht
445.88 million for the year 2004, or a decrease of Baht 43.84 million, due to the fact that the average fare
during the first half of 2005 was 10.36% lower than the average fare for the year 2004 as a result of the
Company’s sales promotion policy and the reduced number of days of service caused by the train collision
accident in January 2005.
Total revenue of the Company and its Subsidiaries for the last six months of 2005 was Baht 643.97
million, representing an increase by Baht 241.93 million or an increase of 60.18% compared with total
revenue of Baht 402.04 million for the first six months of 2005. The result was mainly due to the increase
of Baht 190.34 million in fare revenue of the Company or an increase of 47.58%, and the increase of Baht
51.48 million in revenue from commercial development.
Fare Revenue
Fare revenue was the main source of revenue of the Company. For the year 2004, fare revenue
totaled Baht 443.14 million or 99.39% of total revenue, which was generated for a six month period (3 July
– 31 December 2004), with an average revenue per day of Baht 2.43 million (calculated from a total of 182
days of service). The average daily passengers amounted to approximately 147,458 passengers, with the
average daily fare per passenger of Baht 16.51 and the average trip length of 6.04 stations over this period.
Fare revenue in the first six months of 2005 was Baht 400.03 million (included the fare
compensation revenue of Baht 20.48 million), or representing an average revenue per day of Baht 2.41
million (calculated from a total of 166 days of services). The average daily passengers amounted to
approximately 161,896 passengers, with the average fare per passenger of Baht 14.88 and the average trip
length of 6.38 stations over this period. Fare revenue in the first six months of 2005 was approximately
9.73% less than fare revenue for the year 2004 although the average daily passengers increased by 9.79%

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Annual Report 2005

as the average fare rate in the first six months of 2005 was 10.36% lower than the average fare rate for the
year 2004 due to the Company’s sales promotion policy. Moreover, the number of days of service in the
first six months of 2005 was lower than that for the year 2004 as a result of the train collision accident in
January 2005.
With respect to the results of operations for the last six months of 2005, the Company generated
fare revenue of Baht 590.36 million, or an average revenue per day of Baht 3.21 million (calculated from a
total of 184 days of service).

The average daily passengers amounted to approximately 164,762

passengers, with the average fare per passenger of Baht 19.47 and the average trip length of 5.87 stations
over this period. The increase of total fare revenue was due to the total of 184 days of service for the last
six months of 2005, which was higher than the total of 166 days of service for the first six months of 2005.
Based on the day of service, the average fare revenue per day for the last six months of 2005 was Baht 3.21
million, representing an increase of 33.20% from the period of the first six months of 2005. The result was
due to the increase at 1.77% of the average daily passengers and the increase at 30.85% of the average fare
rate per passenger, compared with the first six months of 2005. The fare rate for the period of 7 January –
4 June 2005 was a special discounted fare rate as agreed between the Company and the MRTA to promote
the use of the metro service. From 5 June 2005, the fare rate was adjusted at a discount of 15 – 20% from
the fare rate per the Concession Agreement. The fare rate was re-adjusted according to the Concession
Agreement on 1 October 2005, representing the increasing average fare rate for the last six months of 2005.
Fare Compensation Revenue
The Company received fare compensation revenue from the MRTA for the first six months of
2005 totaling Baht 20.48 million for the Company’s cooperation with the MRTA to test discounted fare
rates of the M.R.T. Chaloem Ratchamongkhon Line from those specified under the Concession Agreement
from 7 January 2005 to 4 June 2005. The MRTA agreed to compensate the Company for an amount equal
to 80% of the shortfall of actual revenue received by the Company each day from the revenue specified in
the memorandum of agreement dated 6 January 2005. Such fare compensation revenue applies only to the
special fare rate period during the first six months of 2005.
Commercial Development Revenue
Apart from the right to operate the metro service, the Company is also entitled to solely conduct
the commercial development under the Concession Agreement. Commercial development revenue can be
divided into two categories as follows:
1) The Company has granted the rights directly to other companies, generating rental income
from lease of space for ATM services, public telephone services, Platform Screen Doors (PSDs) for media
advertisements, LCD installation inside the trains and plasma screen installation in the station areas.
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Annual Report 2005

2) The Company has granted the rights to its Subsidiaries for management, generating rental
income from retail spaces in the stations and the basement level in the Lat Phrao park and ride facility (by
Metro Mall Development Limited), still advertising medias in the trains and station areas (by Triads
Networks Company Limited), and service and maintenance of telecommunications system equipment (by
BMCL Network Limited).
For the last six months of 2005, the Company and its Subsidiaries generated revenue from the
commercial development of Baht 52.14 million, representing an increase of Baht 50.94 million from Baht
1.20 million from advertising revenue and rental income from public telephone service in the first six
months of 2005. The high increasing commercial development revenue in this last six month period
comprised revenues mainly from (i) Triads Networks Company Limited, which started its advertising
operations in June 2005, accounting for an increase of Baht 35.77 million; (ii) Metro Mall Development
Limited, which started to operate the first rental space areas at Sukhumvit Station in September 2005 and
the second at Phahon Yothin Station in December 2005, accounting for an increase of Baht 4.75 million;
and (iii) the ATM installation, accounting for Baht 10.41 million.
Other Income
Other income of the Company and its Subsidiaries comprises interest income and profit from sale
of assets.
For the first six months of 2005, the Company and its Subsidiaries generated other income totaling
Baht 1.08 million, representing a decrease from Baht 1.43 million for the same period of 2004, mainly due
to the reduction of interest income from the decrease of available cash during the period. For the last six
months of 2005, the Company and its Subsidiaries generated other income totaling Baht 1.19 million,
representing a slight increase of Baht 0.11 million or 10.19% from the first six months of 2005.
Total Expenses
Total expenses of the Company and its Subsidiaries mainly comprise cost of fare, commercial
development cost, amortisation of project costs and selling and administrative expenses. For the first six
months of 2005, the total expenses amounted to Baht 1,010.83 million which was 3.31% lower than the
total expenses of Baht 1,045.48 million for the year 2004, due to a decrease in selling and administrative
expenses.
For the last six months of 2005, the Company and its Subsidiaries had total expenses of Baht
949.83 million which decreased from total expenses of Baht 61.00 million for the first six months of 2005,
representing a decrease of 6.03%. The Company recorded the selling and administrative expenses at an
increase of approximately Baht 89 million for the first six months of 2005 due to the Companyâ&#x20AC;&#x2122;s presenting

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Annual Report 2005

the said amount to Their Majesties the King and the Queen for charity purposes at the discretion of their
Majesties (from fare revenue during the period of 3 July 2004 – 12 August 2004). In addition, the
Company and its Subsidiaries had the increased costs of commercial and development of Baht 33.11
million due to the commencement of two Subsidiaries’ operations.
Cost of Fare
The cost of fare mainly comprises project management costs, maintenance costs, insurance
premiums, and public utilities costs, such as, electricity and water supply, salary and welfare costs of staff
and remuneration to the MRTA.
The cost of fare for the first six months of 2005 was Baht 704.10 million, consisting mainly of
expenses for the maintenance of the M&E Equipment and the civil infrastructure of Baht 313.86 million,
expenses for project management and insurance premiums of Baht 85.34 million, expenses for public
utilities of Baht 165.21 million, salary and welfare for staff of Baht 101.25 million, and remuneration to the
MRTA of Baht 3.80 million. The cost of fare slightly increased by Baht 29.63 million from the year 2004
which was Baht 674.47 million due to the increase of the maintenance expenses of the M&E Equipment
and trackwork of Baht 28.92 million. For the year 2004, the cost of fare amounted to Baht 674.47 million,
consisting mainly of expenses for the maintenance of the M&E Equipment and the civil infrastructure of
Baht 288.66 million, expenses for project management and insurance premiums of Baht 91.00 million,
expenses for public utilities of Baht 164.00 million, salary and welfare for staff of Baht 102.68 million, and
remuneration to the MRTA of Baht 4.43 million.
The Company’s cost of fare for the last six months of 2005 was Baht 713.30 million, consisting
mainly of expenses for the maintenance of the M&E Equipment and the civil infrastructure of Baht 288.58
million, expenses for project management and insurance premiums of Baht 94.45 million, expenses for
public utilities of Baht 188.12 million, salary and welfare for staff of Baht 105.91 million, and
remuneration to the MRTA of Baht 5.90 million. The cost of fare increased by Baht 9.20 million mainly
due to the increased insurance premiums caused by the train collision accident in early 2005.
Commercial Development Cost
In June 2005, the Company and its Subsidiaries first started to generate the commercial
development revenue, thereby incurring the commercial development cost of Baht 0.41 million for the first
six months of 2005, which increased by Baht 33.51 million for the last six months of 2005.

The

commercial development cost mainly comprises the remuneration to the MRTA of Baht 6.68 million,
system maintenance costs and public utilities costs of Baht 14.26 million, and costs of operations of the
Subsidiaries directly due to the commercial development of Baht 5.94 million.

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Annual Report 2005

Amortisation of Project Costs
The amortisation of project costs for the first six months of 2005 was Baht 94.37 million,
representing a slight decreased from Baht 125.00 million in the year 2004. For the last six months of 2005,
the amortisation of project costs was Baht 77.34 million.
Selling and Administrative Expenses
The selling and administrative expenses of the Company and its Subsidiaries for the first six
months of 2005 amounted to Baht 211.95 million, representing a decrease from the year 2004 of Baht
32.71 million or a decrease of Baht 121.71 million, excluding the total fare revenue of Baht 89 million
collected from 3 July 2004 to 12 August 2004 which was presented to Their Majesties the King and Queen,
as this amount was not an ordinary expense regularly incurred. The decrease in selling and administrative
expenses was mainly due to a decrease in advertising expenses, public relations expenses and advisory
fees.
For the last six months of 2005, the selling and administrative expenses of the Company and its
Subsidiaries amounted to Baht 125.67 million, representing a slight increase of Baht 2.72 million or 2.21%
higher than the selling and administrative expenses for the first six months of 2005 which amounted to
Baht 122.95 million (excluding the extraordinary expense of Baht 89 million).
Interest Expenses
Before the commencement of its commercial operations, interest expenses incurred from
borrowings were capitalised as part of project costs. Interest expenses for the year 2004, the first six
months of 2005 and the last six months of 2005, were Baht 375.90 million, Baht 378.99 million and Baht
432.01 million, respectively. The increase of interest expenses was due to the drawdown on additional
long-term loans and the increased interest rates.
Net Profit and Loss
The results of operations of the Company and its Subsidiaries for the past three years of 2003,
2004 and 2005 showed net losses of Baht 72.49 million, Baht 957.21 million, and Baht 1,715.99 million,
respectively. In 2003, the Company had not yet commenced its operations, therefore, the majority of
expenses incurred were capitalised as project costs and amortised throughout the Concession period
according to the Units of Throughput Amortization Method. In 2004 and 2005, the costs incurred after the
operation commencement were treated as expenses for the respective years, resulting in increase of net
losses in the income statements, as compared to 2003.

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Annual Report 2005

The net loss incurred during the last six months of 2005 was Baht 736.21 million, lower than that
for the first six months of 2005 which was Baht 979.78 million, representing a decrease of Baht 243.57
million mainly due to the increase of fare revenue and commercial development revenue.
The net loss generated in the early years of operation is common for investments in large-scale
public infrastructure projects. The Companyâ&#x20AC;&#x2122;s initial revenue from operations was insufficient to cover all
expenses incurred which were mainly fixed costs under the relevant contracts, such as, maintenance costs,
project management costs, project cost amortisation, depreciation and other amortisation including interest
expense. The number of passengers using the metro may be rather low during the initial stage as it would
take some time for passengers to become familiar with the railway mass transit, which is a new mass transit
system. In addition, the Company had to use a favorable pricing policy to attract passengers and therefore
fares were not at the normal rates. The management of the Company is however confident that the number
of passengers using the M.R.T. Chaloem Ratchamongkhon Line will increase substantially resulting in
improved results of operations of the Company in the near future.
As at 31 December 2005, the Company and its Subsidiaries had the total accumulated losses of
Baht 2,836.20 million.

13.3

Analysis of Financial Position

Assets
Assets of the Company and its Subsidiaries consist mainly of cash and cash equivalents, amounts
due from related parties, other current assets, project costs, equipment and other non-current assets.
As at 31 December 2004, the Company and its Subsidiaries had total assets of Baht 19,305.65
million, representing an increase of Baht 3,165.65 million or 19.61% from Baht 16,140.00 million as at 31
December 2003. This was mainly due to the increase in project costs relating to the M&E Equipment for
the train operation, and investment in infrastructure for commercial development by the Subsidiaries,
including an increase in cash and cash equivalents. The main sources of funds were long-term loans and a
capital increase of the Company in 2004.
As at 31 December 2005, the Company and its Subsidiaries had total assets of Baht 19,731.50
million, representing an increase of Baht 425.85 million or 2.21% from Baht 19,305.65 million as at 31
December 2004. The increase was due to additional investment in project costs of Baht 420.58 million
which comprises the M&E Equipment for the train operation, telecommunications equipment and
infrastructure for retail areas in the stations as well as the increase of cash and cash equivalents of Baht
98.76 million.

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Annual Report 2005

Cash and Cash Equivalents
Cash and cash equivalents as at 31 December 2004 amounted to Baht 343.92 million, representing
an increase of Baht 167.81 million from Baht 176.11 million as at 31 December 2003 due to an increase in
the Companyâ&#x20AC;&#x2122;s capital of Baht 1,245.22 million and drawdowns on additional long-term loans of Baht
2,103.00 million for investment in the metro system and various equipment.
Cash and cash equivalents as at 31 December 2005 amounted to Baht 442.68 million, representing
an increase of Baht 98.76 million from Baht 343.92 million as at 31 December 2004. The increase was
28.72% due to, during late 2005, sponsor loan and drawdowns on long-term loans from financial
institutions, as well as the offering of new ordinary shares to the directors, management and staff of the
Company.
Accounts Receivable
As at 31 December 2005, the Company and its Subsidiaries had accounts receivable of Baht 21.62
million from commercial development operations of its Subsidiaries, consisting of accounts receivable
from advertisement procurement of Baht 17.29 million and leasing of retail areas of Baht 4.33 million.
The Company had no accounts receivable as at 31 December 2004 because the Subsidiaries started the
operations in 2005.
Amounts Due from Related Parties
As at 31 December 2004, the Company and its Subsidiaries had amounts due from related parties
of Baht 25.08 million, most of which were amounts invoiced by the Company for installation of emergency
egress signage and door monitoring from Joint Venture BCKT. These amounts were subsequently paid in
accordance with the conditions in the memorandum of agreement. As a consequence, as at 31 December
2005, the Company and its Subsidiaries had amounts due from related parties of only Baht 0.09 million,
relating mainly to the business traveller stored value cards as New Year souvenirs.
Short-term Loan to other company
As at 31 December 2005, Triads Networks Company Limited had the short-term loan to other
company of Baht 2.50 million.
Other Current Assets
Other current assets as at 31 December 2004 totaled Baht 127.02 million, mainly consisting of
accounts receivable under forward contracts, prepaid expenses, and other accounts receivable, representing
an increase of Baht 67.69 million or 114.09% from total other current assets of Baht 59.33 million as at 31
December 2003. This was mainly due to an increase in prepaid expenses from insurance premiums

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Annual Report 2005

incurred after the commencement of the operations, consisting of premiums for Property All Risk
Insurance, premiums for Terrorism Insurance and premiums for other insurance. The increase in prepaid
insurance premiums for the year 2004 was Baht 52.50 million.
Other current assets of the Company and its Subsidiaries as at 31 December 2005 totaled Baht
155.83 million, mainly consisting of prepaid expenses of Baht 77.59 million, stored value card inventory of
Baht 28.05 million, and accrued income of Baht 22.34 million. These represented an increase of Baht
28.81 million or 22.68% from other current assets of Baht 127.02 million as at 31 December 2004. The
increase was mainly due to an increase in prepaid expenses of Baht 21.11 million, representing an increase
in accrued income of Baht 22.30 million, and an increase in the stored value card inventory of Baht 22.90
million. Accounts receivable under forward contracts and other accounts receivable decreased by Baht
24.05 million and Baht 20.20 million, respectively.
Advance Payment for Construction
As at 31 December 2005, the Company and its Subsidiaries paid an advance for construction of
Baht 12.42 million resulting from Metro Mall Development Limited employing CH. Karnchang Public
Company Limited to construct retail areas in the stations, with a total project value of Baht 292.50 million.
Under the construction contract, an advance payment for construction was charged at 15% of the total
construction cost.
Project Costs
Costs and expenses for project development, such as, project management costs, advisory costs,
design costs for the M&E Equipment, the depot and administration building, interest expenses and other
financial expenses, including additional expenses due to an acceleration in the procurement of equipment
of approximately Baht 500 million were recorded as project costs. The total project costs of the Company
as at 31 December 2004 were Baht 18,448.72 million, representing an increase of Baht 2,589.53 million
from Baht 15,859.19 million as at 31 December 2003.
The net project costs as at 31 December 2005 were Baht 18,697.59 million, representing an
increase of 1.35% from 31 December 2004. The increase was due to the completion of the M&E
Equipment and the commencement of the operations. In 2005, the Company made payment for the M&E
Equipment, telecommunications system in the stations, and investment in public utility system for retail
spaces in the stations in the total amount of Baht 339.09 million.
Net Equipment
As at 31 December 2004, the Company and its Subsidiaries had net equipment with a total value of
Baht 321.30 million, representing an increase from Baht 39.73 million as at 31 December 2003 due to
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Annual Report 2005

investment by the Subsidiaries in the decoration of leased spaces of approximately Baht 210.13 million and
in telecommunications equipment of Baht 42.13 million.
As at 31 December 2005, the Company and its Subsidiaries had net equipment with a total value of
Baht 364.62 million, representing a slight increase of Baht 43.32 million from Baht 321.30 million as at 31
December 2004. The increase was mainly due to investment in the leased spaces of approximately Baht
20.32 million and in advertising equipment of Baht 22.00 million.
Total Liabilities
As at 31 December 2004, the Company and its Subsidiaries had total liabilities of Baht 12,585.10
million, representing an increase of Baht 2,686.95 million from Baht 9,898.16 million as at 31 December
2003 or a 27.15% increase, mainly due to an increase in long-term loans and construction payables.
Total liabilities as at 31 December 2005 was Baht 14,314.24 million, representing an increase of
Baht 1,729.13 million from Baht 12,585.10 million as at 31 December 2004, due to increases in long-term
loans from shareholders and accrued interest of Baht 1,438.75 million, long-term loans from financial
institutions of Baht 199.00 million, and bank overdrafts and short-term loans from financial institutions of
the Subsidiaries of Baht 16.25 million.
Construction and Other Payables
Construction and other payables of the Company and its Subsidiaries as at 31 December 2004
amounted to Baht 572.41 million consisting of accounts payable to related parties and other companies of
Baht 204.17 million and Baht 368.25 million, respectively, as a result of a substantial increase in
construction payables of Baht 492.34 million from Baht 80.08 million in 2003 or representing a 614.80%
increase. The increase was mainly due to Metro Mall Development Limited employing CH. Karnchang
Public Company Limited to carry out construction of retail areas in 11 stations, with a total project value of
Baht 292.50 million.
As at 31 December 2005, construction and other payables of the Company and its Subsidiaries
amounted to Baht 591.70 million consisting of accounts payable to related parties and other companies of
Baht 291.71 million and Baht 299.99 million, respectively, representing an increase of Baht 87.55 million
from accounts payable to related parties as at 31 December 2004. The increase was due to accrued project
management payables of Baht 83.13 million. The accounts payable to other companies decreased by Baht
68.26 million from 31 December 2004.

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Annual Report 2005

Unearned Fare Revenue
Unearned fare revenue was derived from the sale of stored value cards. The Company records
revenue from the sale of stored value cards as unearned fare revenue, which will be gradually recognised as
revenue when passengers use the stored value cards. As at 31 December 2005, the Company had unearned
fare revenue of Baht 33.19 million, representing an increase of Baht 11.33 million or 51.84% from Baht
21.86 million as at 31 December 2004. Passengers have increasingly shown a preference for using stored
value cards as evidenced by the increase in the ratio of passengers using tokens to passengers using stored
value cards for the years 2004 and 2005 was 74:26 and 56:44, respectively.
Long-term Loans
Long-term loans of the Company and its Subsidiaries as at 31 December 2004 and 31 December
2005 were Baht 11,915.50 million and Baht 12,114.50 million, respectively, (including current portion of
long-term loans), comprising long-term loans under the following agreements:

- Total facility
amount of Baht
500 million
- Amount drawn
as at 31
December 2005
was Baht 500
million
- Total facility
amount of Baht
650 million, and
the amount
drawn as at 31
December 2005
was Baht 614.00
million

Objectives

Interest/Fee

- For payment of additional
project costs incurred by the
acceleration of the
procurement of the M&E
Equipment and additional
construction work of the depot

- Interest at the rate of MLR
+ 0.25% per annum for
the period prior to the
project completion date.

- For payment of additional
expenses incurred under the
M&E Equipment Contracts,
additional project management
fees from payment of
infrastructure works for the
retail areas in relation to
commercial development,
costs of equipment in the
stations, and mobilization fees
for the civil infrastructure
maintenance contracts and for
investment in the Subsidiaries

- Interest at the rate of MLR
+ 0.5% per annum
throughout the term of the
agreement.

Repayment Conditions

- Full principal repayment in June 2017

- MLR per annum after the
project completion date.

- Full principal repayment in June 2017

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Annual Report 2005

Shareholders’ Equity
As at 31 December 2004, shareholders’ equity of the Company and its Subsidiaries was Baht
6,720.54 million, representing an increase of Baht 478.70 million from the end of the year 2003 due to the
Company’s capital increase and call for share payment from Baht 6,404.84 million to Baht 7,250.00 million.
Shareholders’ equity of the Company and its Subsidiaries as at 31 December 2005 was Baht
5,417.26 million, representing a decrease of Baht 1,303.28 million or 19.39% from Baht 6,720.54 million as
at 31 December 2004. The decrease was mainly due to an increase in the Company’s net loss by Baht
1,716.00 million from the year 2005, which was common in the early years of investment in infrastructure
project. In December 2005, the Company obtained a capital increase from the offering of new shares to the
directors, management and staff in the amount of Baht 296.69 million.
Liquidity
As at 31 December 2005, the Company and its Subsidiaries had cash and cash equivalents of Baht
442.68 million, representing a net increase of Baht 98.76 million as at 31 December 2004, as per the details
as follows:
Cash Flow from Operating Activities
The net cash flow from operating activities of the Company and its Subsidiaries was Baht 374.21
million, Baht 303.00 million and Baht 1,445.25 million for the years 2003, 2004 and 2005, respectively,
representing the operating expenditure more than operating revenue. This was due to the fact that the
Company commenced operations and actually generated revenue in the middle of 2004. As the nature of the
Company’s business is a provision of infrastructure service, it requires a certain period of time for the
number of passengers to increase, while the operating expenditure did not vary by the number of passengers.
Cash Flow from Investing Activities
For the year 2003, the net cash flow used in investing activities of the Company and its Subsidiaries
was Baht 6,537.13 million, mostly comprising investments in project costs and equipment of Baht 6,613.36
million and Baht 33.07 million, respectively, which related to the Company’s investment in the M&E
Equipment. Cash flow used in investing activities of the Company and its Subsidiaries in the year 2004
decreased significantly from the year 2003 to Baht 3,047.01 million, due to completion of the M&E
Equipment ready for service, and decreased to merely Baht 501.33 million in the year 2005.
Cash Flow from Financing Activities
For the year 2003, the cash flow from financing activities of the Company and its Subsidiaries was
Baht 7,079.53 million, resulting from the drawdowns on long-term loans of Baht 4,077.50 million and an
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Annual Report 2005

increase in capital of Baht 3,002.03 million. Similarly in the year 2004, the Company drew down Baht
2,103.00 million on its long-term loans, and increased the registered capital from Baht 6,800.00 million to
Baht 7,350.00 million and call for share payment in respect of the existing shares and partial payment of the
new shares, in the total amount of Baht 1,245.22 million.
For the year 2005, cash flow from financing activities of the Company and its Subsidiaries totaled
Baht 2,045.33 million. Sources of funds comprised loans from financial institutions of Baht 215.25 million
and long-term loans of Baht 1,403.00 million from CH. Karnchang Public Company Limited for use as
working capital pursuant to the sponsor support agreement. From January to March 2005, the Company had
a cash inflow of Baht 130.39 million from the issue and allocation of 43.46 million new shares for capital
increase at the offering price of Baht 3 per share, and during December 2005, from the issue and allocation
of Baht 296.69 million new shares for capital increase at the offering price of Baht 1 per share to directors,
management and staff.
The Company’s total liquidity was from the capital increase, long-term loans from financial
institutions, including financial support from the Company’s major shareholder, namely, CH. Karnchang
Public Company Limited, in the form of the sponsor support subordinated loan. This was because in the
initial stage, the Company’s revenue was not sufficient to cover various expenses and interest incurred.
Apart from funding from financial institutions and the Company’s major shareholder, the Company
expects to raise funds on the Stock Exchange of Thailand and from sale of capital increase shares to the
MRTA, which will improve the Company’s liquidity. The Company will use the proceeds from the capital
increase to repay part of the loans from financial institutions to reduce the Company’s interest expense
burden, and appropriately improve the financial structure.
Auditor’s Fee
For the fiscal year ended 31 December 2005, the audit fees paid to the Company’s auditor, namely,
Ernst and Young Office Limited, totaled Baht 1,180,000.00, which included the audit fees of the Company
and its Subsidiaries as detailed below:
Summary of the Company and the Subsidiaries’ Audit Fees in 2005
Company

Auditor

Audit Fee (Baht)

Bangkok Metro Public Company Limited

Ruth Chaowanagawi

700,000.00

BMCL Network Limited

Siraporn Ouaanunkun

110,000.00

Triads Networks Company Limited

Siraporn Ouaanunkun

180,000.00

Metro Mall Development Limited

Siraporn Ouaanunkun

190,000.00

Total Audit Fees

1,180,000.00

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Annual Report 2005

The Company and its Subsidiaries had no other non-audit fees payable to the auditors, the auditing
firm of which the auditor is a member, and any person or business relating to the auditors and the auditing
firm of which the auditor is a member.

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Annual Report 2005

14.

Significant Activities in the Year 2005
In the year 2005, the Company organised significant activities as follows:
Thai Children’s Day with the Metro
The Company held activities for the 2005 National Children’s Day
on Friday, 7 January 2005 and Saturday, 8 January 2005, at the
open area in front of Fortune Town Building, around Gate 1 of
Phra Ram 9 Station, with various performances on stage,
questionnaires, recreational activities and informative session in
relation to the safety of using the metro service.

Wedding Bells Ringing on the Valentine’s Day 2005
On the occasion of the love festival, the Company organised a
marriage registration event on Monday, 14 February 2005, in the
Northern Concourse Level of Bang Sue Station, with the Bang
Sue District Officers as registrars. The first 200 couples
participating in the registration event received souvenirs from
various agencies, ticket packages as a gift. A wide range of
agencies participating in this event include Krungthai AXA Life
Insurance Co., Ltd. and the Faculty of Nursing, Mahidol
University. There were 399 interested couples participating in this
marriage registration event.

Elders on the Metro
The Company in collaboration with the Mass Rapid Transit
Authority of Thailand (MRTA) held an activity for the National
Elderly Day on 14 April 2005, by arranging for 80 elders from the
Vasanawet Homes for the Aged, Phra Nakhon Si Ayutthaya
Province, to take a free trial commute on the metro and to use
facilities in the stations, traveling from Hua Lamphong Station to
Lat Phrao Station. The elders were impressed by the reception
and services provided by the Company’s staff, and felt confident
in the safety of using the metro service. As for those who missed
the trip on board, the Company also organised a Thai traditional
event at the Vasanawet Homes for the Aged, namely, Rod Nam
Dam Hua (pouring water on elders’ palms to pay respect) and
gave souvenirs.

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Annual Report 2005

1st Anniversary of Operation of the M.R.T. Chaloem
Ratchamongkhon Line Project
The Company in cooperation with the Mass Rapid Transit
Authority of Thailand (MRTA) organised a thank you campaign
for passengers who have been providing good support to its
operations. Passengers using Stored Value Cards were to receive
a lucky draw coupon for every Baht 100 of adding value to the
cards at the Ticketing Offices in all 18 stations during 3 June 2005
– 3 July 2005. In this regard, passengers sent 130,000 coupons to
attend such event from the total of 220,000 coupons distributed.
The drawing event was held on 3 July 2005 at the Queen Sirikit
National Convention Centre Station. In addition, an informative
exhibition on the history of the metro, with a discussion about the
metro by Dr. Sombat Kitjalaksana, the Managing Director of the
Company, and Mr. Prapat Chongsanguan, the Governor of the
MRTA. Moreover, during 4 – 8 July 2005, in trains and all 18
stations, there were game activities including delivering gifts to
the metro commuters by the M.R.T. Pretty Girls.

White Cane Rally 2005
The Company in collaboration with the Mass Rapid Transit
Authority of Thailand (MRTA) and the Thailand Association of
the Blind held an event, “White Canes Lead the Blind to
Sustainable Freedom on the International White Cane Day” by
organising a rally on the M.R.T. train between Lat Phrao Station
and Bang Sue Station on Saturday, 22 October 2005, with an aim
to encouraging those visually impaired to have confidence and
reliability in the use of the M.R.T. service.

Safety Zone Program
The Company in cooperation with the Mass Rapid Transit
Authority of Thailand (MRTA), government agencies and private
entities, such as, the Metropolitan Police Bureau, the Railway
Police Division and the City Law Enforcement Department,
Bangkok Metropolitan Administration, held the Safety Zone
Program on 24 June 2005, at the Concourse Level, Hua Lamphong
Station, with an aim to publicising the Safety Zone Program in the
M.R.T. system to commuters and the general public so as to build
up their confidence in the security system whilst using the M.R.T.
service.

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Annual Report 2005

The Company’s Booth in SET in the City
The Company in cooperation with the CH. Karnchang Group held
an exhibition at the Queen Sirikit National Convention Centre
during 17 – 20 November 2005, with an aim to introducing and
providing information regarding the Company in preparation for
listing on the Stock Exchange of Thailand, presented by the
Master of Ceremony and through the audio visual presentation
relating to the M.R.T. Project, questionnaires, games for prizes,
and souvenirs to visitors. This event caused the general public,
investors and the M.R.T. commuters to have more knowledge and
understanding about the Company’s operations, and confidence in
the Company’s capability to become a listed company. In
addition, the Company obtained information and suggestion from
service users who participated in such event, which would be the
important guidelines for the service quality improvement to meet
the users’ requirements.

Training and Drills on “Crisis Management in the
M.R.T. Chaloem Ratchamongkhon Line System”
The Company in collaboration with the Mass Rapid Transit
Authority of Thailand (MRTA), the Metropolitan Police Bureau,
the Disaster Prevention and Mitigation Department, the
Narenthorn Center, the Government Public Relations Department,
the Railway Police Division and the Noppawong Railway Police
Station, held the “Crisis Management in the M.R.T. Chaloem
Ratchamongkhon Line System” training and drills during 17 – 23
September 2005 at Chatuchak Park Station, Thailand Cultural
Centre Station, Hua Lamphong Station, Queen Sirikit National
Centre Station, the Depot, the Administrative Building, the
Operation Control Room and the Metropolitan Police Bureau.
The objectives of this program were to ensure that officers of the
Company and officers from the external agencies would be able to
efficiently handle all emergency circumstances in the metro, to
improve skills of the M.R.T. operation officers and to ensure
rapidity and good cooperation between officers of the Company
and officers from the external agencies, as well as to minimize
damage, resulting in the optimum safety to the service users and
the general public using the metro service.

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Annual Report 2005

M.R.T. Visits Educational Institutes

The Company organised the M.R.T. Project Visits
Educational Institutes program during November 2004 January 2005, with an aim to promoting and public relations
on the understanding on the safe use of the metro and assuring
the confidence in the safety of the metro, focusing on the tasks
regarding public disaster mitigation, liaison with external
agencies in case of emergency, and safe use of the system.

The National Safety Week

The Company arranged an exhibition in the National Safety
Week at the Impact Muang Thong Thani, during 9 â&#x20AC;&#x201C; 11 May
2005, for the purpose of public relations on the management
system, achievements, activities, products and safety system,
by providing information to understand the metro through the
audio visual presentation and images that reflect the safety
system of the metro. In addition, there were questionnaires
and quiz games for prizes, with approximately 3,000 people
interested and participating in this event.

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Annual Report 2005

15. Report on Responsibilities of the Board of Directors towards the Financial Report
The Board of Directors realizes the significance of its duties and responsibilities in supervising the
Company’s business to ensure good management in accordance with laws, detailed objectives and the
Company’s Articles of Association, as well as resolutions of the shareholders meetings with integrity and
prudence. The Board of Directors protects the benefits of the Company and shareholders by ensuring that
the Company’s financial report contains accurate and full accounting records that reflect the Company’s
actual financial condition and results of its operations.

The Board of Directors established the Audit Committee comprising independent directors fully
qualified in accordance with the requirements of the Stock Exchange of Thailand to review and ensure
accuracy and sufficiency of the financial report, including accurate and complete disclosure of related party
transactions or transactions with conflict of interest, in compliance with the requirements of the Stock
Exchange of Thailand and relevant rules and regulations. In this regard, the Audit Committee has already
reported their performance to the Board of Directors.

The Board of Directors is of the opinion that the financial statements for the year 2005 of the
Company and its Subsidiaries present fairly, in all material aspects, the financial condition and the results of
operations of the Company and its Subsidiaries in accordance with generally accepted accounting
principles.

(Mr. Plew Trivisvavet)

(Dr. Sombat Kitjalaksana)

Director

Director

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Annual Report 2005

16. Audit Committee’s Report
The 2005 Annual Ordinary General Meeting of Shareholders of Bangkok Metro Public
Company Limited, which was held on April 29, 2005, resolved to appoint the Audit Committee of
Bangkok Metro Public Company Limited, comprising three qualified persons in the fields of law, finance
and corporate management, namely, General Chetta Thanajaro, as the Audit Committee Chairman,
Lieutenant General Surat Samrith and Mr. Vitoon Tejatussanasoontorn, as the Audit Committee
members. In the year 2005, the Audit Committee had three meetings with the high level executives and
the management of the Company, and assigned the Company’s executives in the main lines of work to
present results of the Company’s operations, and also had meetings with Ernst & Young Office Limited,
the Company’s auditor, to review the Company’s financial reports.
The Audit Committee has performed and been responsible for its duties as assigned by the
Company’s Board of Directors, in accordance with the regulations of Bangkok Metro Public Company
Limited on the rules and guidelines for practice of the Audit Committee in line with the requirements of
the Stock Exchange of Thailand, as may be summarized as follows:
1. The Audit Committee, along with the management and Ernst & Young Office Limited,
jointly reviewed the quarterly and 2005 annual financial statements in compliance with generally
accepted accounting standards so as to ensure the correctness and reliability of the accounting system and
its financial reports, as well as the sufficient disclosure of information in the financial statements. The
Audit Committee also emphasized on review of related party transactions between the Company, and its
subsidiaries and associated companies to ensure that the Company has executed the transactions in the
ordinary course of business and in accordance with the rules as set forth by the Stock Exchange of
Thailand, as well as disclosed sufficient information, for the benefits of investors.
In review of the financial statements and compliance with applicable regulations and laws,
the Audit Committee is of the opinion that the Company has complied with the applicable laws, and its
accounting system and financial reports are correct and reliable.
2. The Audit Committee reviewed the evaluation of the Company’s internal control system,
which is sufficient for the business operations and achieves the objectives of the internal control in
respect of effectiveness and efficiency of its operation in resource utilization, which include the asset
monitoring, prevention or minimization of error, damage, leakage, consumption or dishonesty, reliability
of the financial reports and results of operations, compliance with laws, rules and regulations, in respect
of which the Company’s auditor was of the common opinion that neither material fault nor problem were
found. In the year 2005, the internal control evaluation undertaken by the Company’s management
resulted that the Company’s internal control system was sufficient and effective.

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Annual Report 2005

3. The Audit Committee supervised the internal audit to be in line with the approved plan
by reviewing the audit report for the year 2005 so as to ensure efficient and effective operation with good
internal control system and compliance with the law on securities and exchange or the law relating to the
business of the Company, and follow up the amendment in accordance with the audit report in material
issues for the good corporate governance.

In addition, the Audit Committee has considered the audit plan for the year 2006 which was
prepared based on the Companyâ&#x20AC;&#x2122;s internal control evaluation and risk base by planning an audit,
operation in relation to management for maintenance of main operating equipment, security system of
the train system and revenue collection reporting system, compliance with the law on the listed
companies on the Stock Exchange of Thailand, and enforcement of applicable rules and regulations for
the staff of the Company. This is to ensure that the scope of the audit plan covers all material issues,
accommodates the prevention from possible risk, provides appropriate internal control for the corporate
risk management and brings optimum benefits to the Company and its shareholders.
Furthermore, the Audit Committee proposed the Board of Directors to consider nominating
either Miss Siraporn Ouaanunkun, Certified Public Accountant No. 3844, and/or Mr. Narong Puntawong,
Certified Public Accountant No. 3315, and/or Mr. Supachai Phanyawattano, Certified Public Accountant
No. 3930, of Ernst & Young Office Limited as the Companyâ&#x20AC;&#x2122;s auditor for the year 2006, with the
auditing fee in the total amount of not exceeding Baht 870,000, so as to propose such nomination to the
Ordinary General Meeting of Shareholders for further approval.

(General Chetta Thanajaro)
Chairman of the Audit Committee

94

Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
REPORT AND FINANCIAL STATEMENTS
31 DECEMBER 2005 AND 2004

95

Annual Report 2005

Report of Independent Auditor
To The Board of Directors and Shareholders of
Bangkok Metro Public Company Limited

I have audited the consolidated balance sheets of Bangkok Metro Public Company Limited and its
subsidiaries as at 31 December 2005 and 2004, and the related consolidated statements of earnings,
changes in shareholdersâ&#x20AC;&#x2122; equity and cash flows for the years then ended, and the separate financial
statements of Bangkok Metro Public Company Limited for the same periods. These financial statements
are the responsibility of the Companyâ&#x20AC;&#x2122;s management as to their correctness and the completeness of the
presentation. My responsibility is to express an opinion on these financial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require
that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Bangkok Metro Public Company Limited and its subsidiaries, and of Bangkok Metro
Public Company Limited as at 31 December 2005 and 2004, and the results of their operations, and cash
flows for the years then ended in accordance with generally accepted accounting principles.

Ruth Chaowanagawi
Certified Public Accountant (Thailand) No. 3247

Ernst & Young Office Limited
Bangkok : 22 February 2006

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
BALANCE SHEETS
AS AT 31 DECEMBER 2005 AND 2004
(Unit : Baht)

The accompanying notes are an integral part of the financial statements.

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Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
CASH FLOWS STATEMENTS (Continued)
FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004
(Unit : Baht)
Consolidated
The Company Only
Note
2005
2004
2005
2004

Cash flows from (used in) investing activities
Increase in loans to other company
Increase in investment in subsidiaries
Net cash payments for purchase of investment
in subsidiaries
Increase in equipment
Proceed from disposal of equipment
Decrease (increase) in advance for construction
- related company
Increase in project costs
Cash received from minority shareholders
Cash paid to minority shareholders
Net cash used in investing activities
Cash flows from (used in) financing activities
Increase in bank overdraft and short-term loan
from financial institution
Increase in long-term loans
Increase in long-term loans from shareholder
Cash received from called up ordinary shares
and additional ordinary shares
Share subscription received in advance
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental cash flows information
Cash paid during the year for :
Interest expenses (included interest expenses which
capitalised to project costs)
Corporate income tax and withholding tax
deducted at source

The accompanying notes are an integral part of the financial statements.

104

Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
31 DECEMBER 2005 AND 2004

1. GENERAL INFORMATION
Bangkok Metro Company Limited was incorporated as a limited company under Thai laws and
operated in Thailand. Its major shareholder is CH. Karnchang group of companies. The Company
registered the change of its status to a public limited company under the Public Limited Companies Act
and the change of its name to Bangkok Metro Public Company Limited with the Ministry of
Commerce on 11 May 2004.
The Company’s registered office is located at 587 Sutthisarn Road, Khwaeng Dindaeng, Khet
Dindaeng, Bangkok.

a) On 1 August 2000, the Company entered into “Agreement for the MRTA Initial System Project Chaloem Ratchamongkhon Line” (“the Concession Agreement”) with the Mass Rapid Transit
Authority of Thailand (“the MRTA”) to design, manufacture, supply, install, test and commission
of the M&E Equipment and for the operation and maintenance of the MRTA Initial System. The
Agreement is for 25 years from the date that MRTA issues a Notice of No Objection to
Commencement of Revenue Service. The MRTA Initial System was officially opened on 3 July
2004.

Under the Agreement, the Company has certain commitments to make payment of remunerations
to the MRTA which consist of remuneration from fares, remuneration from commercial
development, apportion of profit calculated from the Return on Equity (ROE) and any benefit from
the interest rate on a credit agreement which lower than the specified rate, at the rate as mentioned
in the Agreement. Furthermore, the Agreement stipulates the maintenance of the proportion of
shareholding of the main shareholders and a fine in case that the Project was delayed.

b) On 19 December 2001 the Company entered into a long-term loan agreement with a group of
domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement). The loan
agreement, which was amended by the first, the second, the third and the forth supplemental
agreements dated 27 January 2003 and 18 June 2003, 2 April 2004 and 30 July 2004, respectively,
provides the following 5 credit facilities :
1)

Tranche A Facility : A long-term loan facility of Baht 11,000 million for use in the
payment of project costs.

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Annual Report 2005

2)

Tranche B Facility : A performance guarantee facility of Baht 150 million provided to
guarantee the Company’s obligations to the MRTA under the Concession Agreement.

3)

Tranche C Facility : A performance guarantee facility of Baht 60 million provided to
guarantee the Company’s obligations to the relevant authorities in relation to the Project.

4)

Tranche D Facility : A long-term loan facility of Baht 500 million for use in the payment of
additional costs incurred as a result of the programme to accelerate the procurement of
M&E equipment and the depot modification.

5)

Tranche E Facility : A long-term loan facility of Baht 790 million for use in the payment of
additional expenses incurred under the M&E Equipment Contracts, additional fees incurred
under the Project Management Agreement, basic infrastructure works for the retail areas in
relation to the Commercial Development, additional equipments in stations, mobilization
fees for the Civil Infrastructure maintenance contracts and investment in the Commercial
Development Subsidiaries. Subsequently, the Company and the lenders agreed to reduce
the loan facility to Baht 650 million

2. BASIS OF CONSOLIDATION
The consolidated financial statements for the years ended 31 December 2005 and 2004 include the
financial statements of Bangkok Metro Public Company Limited (hereinafter called “the Company”)
and subsidiaries as follows.

Percentage of total assets of subsidiaries as included in the consolidated financial statements as at 31
December 2005 and 2004 and percentage of total revenue of subsidiaries as included in the
consolidated financial statements for the years ended 31 December 2005 and 2004 are as follows :

Percentage of total assets of
subsidiaries as included in
the consolidated
financial statements
as at 31 December
2005
2004
%
%
1.36
1.36
0.26
0.26

0.27
0.05

Percentage of total revenue of
subsidiaries as included in
the consolidated
financial statements for
the years ended 31 December
2005
2004
%
%
0.47
0.01
3.50

0.03
-

Material intercompany balances and transactions and investment in subsidiaries in the Company’s
accounts and the subsidiaries’ share capital are eliminated on consolidation.
Results of operations of the subsidiaries have been included in the consolidated financial statements
from the effective date of acquisition.

3. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting standards enunciated
under the Accounting Profession Act B.E. 2547.
Significant accounting policies adopted by the Company and its subsidiaries are summarised below :

3.1

Revenues and expenses recognition

a)

Fare box revenue recognition
Smart card and smart token sales are recognised as revenue when the services are
rendered. Prepaid value in stored value smart card is recorded as unearned fare box
revenue in the current liabilities in the balance sheet.

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Annual Report 2005

b)

Commercial development revenue
Commercial development revenue is recognised as income when service has been
rendered.

c)

Other revenues and expenses recognition
An accrual basis of accounting was adopted in recognition of other revenues and expenses.

3.2

Project costs and Unit of Throughput Amortisation Method (Unit of Production)
All expenditures and other related expenses which are incurred to construct the System and to
enable it to become operational (“Project costs”) are capitalised as assets and will be depreciated
over the Concession Period upon the commencement of operation of the System. Such project
costs include management and consultant fees, design costs, electrical and mechanical works and
rolling stock purchased during the Concession Period, interest and other financing expenses. The
Company has been adopting the unit of throughput method of amortisation to amortise such
project costs to be costs of fare box in the earnings statement basing on the following unit of
throughput amortisation formula :

Amortisation for the period

=

Net project costs x Percentage of Passengers for the period

Percentage of Passengers

=

Current period’s actual passengers
(Actual passengers for the current period + Projected

for the period

passengers during the remaining Concession Period)
Net project costs

3.3

=

Total project costs - Accumulated amortization

Investments in subsidiaries
Investments in subsidiaries (in the separate financial statements of the Company) are stated under
the equity method of accounting. Under this method, investments are recorded at costs. For each
subsequent period, investments are adjusted to incorporate the Company’s proportionate share of
the operating results in the subsidiaries.

3.4

Goodwill on consolidation
Goodwill on consolidation which was incurred from the investments in subsidiaries being made
at costs higher than the subsidiaries’ net book value, is regarded as assets and amortised on a
straight-line basis over a period of 10 years.

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Annual Report 2005

3.5

Equipment and depreciation
Equipment is stated at cost less accumulated depreciation. No depreciation is charged for asset
during construction. Depreciation of equipment are calculated on the straight-line method over
the estimated useful lives, which are as follows :

3.6

Leasehold improvement

Concession period of subsidiary

Communication equipment

5

years

Advertising equipment

5

years

Furniture, fixture and office equipment

3 - 5 years

Motor vehicles

5

years

Foreign currencies
Foreign currency transactions incurred during the year are translated into Baht at the rates ruling
on the transaction dates. Monetary assets and liabilities dominated in foreign currency
outstanding on the balance sheet date are translated into Baht at the rates ruling on the balance
sheet date.
Exchange gains and losses incurred before the commencement of operations are capitalised as
part of project costs. Exchange gains and losses incurred after the commencement of operations
are included in determining earnings.

3.7

Financial derivative instruments
The Company occasionally entered into forward exchange contracts to reduce its exposure from
exchange rate fluctuation risk. Premiums or discounts (the difference between the spot exchange
rate and the forward exchange rate at inception of the contracts) are deferred and amortised over
the contract lives using the straight-line method. The amortisations incurred before the
commencement of operations are capitalised as part of project costs. Amortisations incurred after
the commencement of operations are included in determining earnings.

3.8

Employee benefits
The Company and its employees have jointly established a provident fund as approved by the
Ministry of Finance in accordance with Provident Fund Act B.E. 2530. The fund is monthly
contributed to by employees at the rate of 3 percent of their basic salaries and by the Company at
the same rate, and will be paid to the employees upon termination in accordance with the rules of
the Companyâ&#x20AC;&#x2122;s provident fund. The fund is managed by TMB Bank Public Company Limited.

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Annual Report 2005

3.9

Loss per share
Loss per share as presented in the earnings statements is basic loss per share which is determined
by dividing net loss for the year by the weighted average number of ordinary shares in issued
during the year.

3.10 Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits with financial institutions with an
original maturity of 3 months or less since the deposit date.

3.11 Use of accounting estimates
Preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates for certain accounting transactions, affecting amounts
reported in the financial statements and notes related thereto. Subsequent actual results may
differ from these estimates.

4. CASH AND CASH EQUIVALENTS
The Company has pledged its rights to receive deposits from bank accounts, which have outstanding
balances as at 31 December 2005 of approximately Baht 425.8 million (2004 : Baht 273.6 million) to a
group of lenders to secure the Companyâ&#x20AC;&#x2122;s long-term loans from the group of lenders.

5. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable as at 31 December 2005 and 2004 classified by aging are as follows :

Metro Mall Development Limited
In May 2005, the Company purchased 200,000 ordinary shares of Metro Mall Development Limited, at
par value of Baht 10 each, a total of Baht 2,000,000, from other shareholder, increasing the Company’s
total investment in that company to 64 percent of its share capital.

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Annual Report 2005

BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”)
In February 2005, the Company purchased 1,249,998 ordinary shares of BMCL Network Limited, at
par value of Baht 10 each, a total of Baht 12,499,980, from other shareholders, increasing the
Company’s total investment in that company to 100 percent of its share capital.
Subsequently, in December 2005, BMCL Network Limited increased its share capital by Baht
25,000,000 million through the issuance of 2,500,000 ordinary shares at par value of Baht 10 each. The
Company had therefore purchased all additional ordinary shares of that company to maintain its interest
of shareholding in that company of 100 percent.

Triads Networks Company Limited
In March 2005, Triads Networks Company Limited called up 75 percent of its share capital 39,200
ordinary shares, totaling of Baht 2,940,000.
The Company has pledged certain part of share certificates of investments in these three subsidiaries
with a group of lenders to secure the Company’s long-term loans from the group of lenders.

M&E Equipment and depot building and administration building will be transferred to the Mass Rapid
Transit Authority of Thailand after the end of concession agreement, of 25 years, on an Acquire
Operate and Transfer basis.
The Company has assigned the Project’s M&E Equipment, depot building and administration building
to a group of lenders to secure the Company’s long-term loans from the group of lenders.

Depreciation charges of the years as included in the earnings statements
2004

14,352,069

2005

23,402,359

113

Annual Report 2005

(Unit : Baht)
Office
equipment

The Company Only
Office
furniture
Vehicle

Cost
31 December 2004
Addition
Disposal
31 December 2005

47,286,998
12,506,967
(92,065)
59,701,900

15,586,591
10,590,776
(8,025)
26,169,342

19,004,201
40,794
(2,384,700)
16,660,295

81,877,790
23,138,537
(2,484,790)
102,531,537

Accumulated depreciation
31 December 2004
Depreciation for the year
Depreciation on disposal
31 December 2005

13,714,061
11,893,436
(60,058)
25,547,439

2,218,699
3,087,233
(2,815)
5,303,117

5,636,943
3,338,070
(1,912,303)
7,062,710

21,569,703
18,318,739
(1,975,176)
37,913,266

Net book value
31 December 2004

33,572,937

13,367,892

13,367,258

60,308,087

31 December 2005

34,154,461

20,866,225

9,597,585

64,618,271

Total

Depreciation charges of the years as included in the earnings statements
2004

12,875,688

2005

18,318,739

9. BANK OVERDRAFT AND SHORT-TERM LOANS FROM FINANCIAL INSTITUTION
The outstanding balance in the consolidated financial statements as at 31 December 2005 represents the
bank overdraft and short-term loan from financial institution of a subsidiary. The bank overdraft,
amounting to Baht 2.3 million, is from a local bank and subject to interest at the minimum overdraft
rate plus 0.5 percent per annum, while the short-term loan, amounting to Baht 14 million, is from the
same bank, carries interest at 7 percent per annum and is schedule for repayment in January 2006.
Bank overdraft and short-term loan from financial institution are guaranteed by a related company.

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Annual Report 2005

10. LONG-TERM LOANS/CURRENT PORTION OF LONG-TERM LOANS
On 19 December 2001, the Company entered into a long-term loan agreement with a group of
domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement) to obtain a loan
facility of Baht 11,000 million used in the payment of project costs. The loan facilities carry interest at
7.75 percent per annum for the first 2 years from the date of the agreement, and thereafter at MLR plus
0.25 percent per annum until the Project Completion Date, and at MLR per annum after the Project
Completion Date. The loans are scheduled for repayment on an instalment basis commencing March
2006 and the last instalment in December 2016.

Subsequently, on 18 June 2003, the Company entered into a supplemental agreement to the Onshore
Facilities Agreement to obtain an additional loan facility of Baht 500 million used in the payment of
additional costs incurred as a result of the programme to accelerate the procurement of M&E
equipment and depot modification. The loan carries interest at MLR plus 0.25 percent per annum until
the Project Completion Date, and at MLR per annum after the Project Completion Date. The loan is
scheduled for repayment in a single lump sum in June 2017.

Subsequently on 2 April 2004, the Company entered into a supplemental agreement to the Onshore
Facilities Agreement (No.3), under which the loan facility was increased by addition of the Tranche E
Facility of Baht 790 million and subsequently on 30 July 2004, the Company and the lenders agreed to
reduce the loan facility to Baht 650 million. This is to be used for payment of additional expenses
incurred under the M&E Equipment Contracts, additional fees incurred under the Project Management
Agreement, basic infrastructure works for the retail areas in relation to the Commercial Development,
additional equipments in stations, mobilization fees for the Civil Infrastructure maintenance contracts
and investment in the Commercial Development Subsidiaries. The loan facility carries interest at MLR
plus 0.5 percent per annum. The loan is scheduled for repayment in a single lump sum in June 2017.

The loans are secured by the mortgages of the Project’s M&E Equipment, depot building and
administration building, pledges of the Company’s share certificates, share certificates of investments
in subsidiaries, sponsors support, and the assignment of rights and obligations under the Concession
Agreement and the rights to receive deposits in bank accounts.

The loan agreement included covenants imposed by the lenders on, among other things, the proportion
of shareholding of the principal shareholders, changes of the Company’s management, entering into
other loan agreements, entering into any new business or activity which is not related to the Project and
the maintenance of certain financial ratios.

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Annual Report 2005

11. LONG-TERM LOANS FROM SHAREHOLDER AND ACCRUED INTEREST
On 11 March 2005, 27 May 2005, 27 July 2005, 25 August 2005, 28 October 2005, 30 November
2005, 23 December 2005 and 30 December 2005, the Company entered into eight subordinated loans
agreements with a shareholder, under which they were granted long-term loans facilities of Baht 380
million, Baht 150 million, Baht 80 million, Baht 330 million, Baht 80 million, Baht 50 million, Baht
100 million and Baht 233 million, respectively. The loans carry interest at MLR plus 0.5 percent per
annum and principal and interest are to be paid after the Company has paid all indebtedness under the
Onshore Facilities Agreement (as discussed in Note 10) or when the Company has excess cash.

12. RELATED PARTY TRANSACTIONS
During the years, the Company and its subsidiaries had significant business transactions with related
parties (related by the way of shareholding or common shareholders and/or common directors). Such
transactions, which have been concluded on the terms and basis as determined by the Company, its
subsidiaries and those related parties, are under the normal course of business of the Company and its
subsidiaries. The transactions are summarised below :

Commercial development revenue
Project construction costs
Project maintenance costs
Project management fees
- Included as part of
project costs
- Included as part of
costs of fare box
Selling and administrative
expenses
Interest expense and related fee
- Included as part of
project costs
- Included as part of selling
and administrative expenses

Consolidated
2005
2004
18.2
209.6
10.3
4.3

The Company Only
2005
2004
11.8
10.6
10.3
4.3

(Unit : Million Baht)
Pricing policy
Based on contract
Based on contract
Based on contract

-

100.0

-

100.0

Based on contract

62.1

42.8

62.1

42.8

Based on contract

6.6

5.9

-

1.2

Agreed between
parties

-

131.5

-

131.5

Based on contract

350.3

147.8

336.7

143.6

Based on contract

116

Annual Report 2005

The outstanding balances of the above transactions are shown as separate items in the balance sheet as
follows :

13. SHARE CAPITAL/SHARE SUBSCRIPTION RECEIVED IN ADVANCE
During the fourth quarter of 2004, through a share offering the Company allocated 56,536,246
additional ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of
Baht 169.6 million. The Company presented this amount as a “Share subscription received in advance”
in the balance sheet as at 31 December 2004. Subsequently on 14 January 2005, the Company
registered the above paid up share capital with the Ministry of Commerce.

During the first quarter of current year, through a share offering the Company allocated 43,463,754
additional ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of
Baht 130.4 million. The Company registered the above paid up share capital with the Ministry of
Commerce on 1 March 2005 to be a paid up share capital of Baht 7,350 million, comprises of 7,350
million ordinary shares of Baht 1 each.

119

Annual Report 2005

On 29 April 2005, the Annual General Meeting of the Company’s shareholders passed resolution to
increase the Company’s registered share capital from Baht 7,350 million to Baht 10,400 million
through the issuance of 3,050 million ordinary shares with a par value of Baht 1 each, to be allocated at
the following basis.
a)

300 million ordinary shares are to be allocated and offered, in whole or in part, to directors,
management, and employees of the Company. These may be made on one or several occasions.
Any ordinary shares remaining after the allocation are to be allocated by means of public
offerings. These offers may be in Thailand and/or abroad and made on one or several occasions.
In this regard, the Executive Board or any persons assigned by the Company’s executive board
are granted the authority to determine the allocation of offering rights, and all details and
conditions in respect of the number of ordinary shares to be offered in each occasion, the offer
period, the payment of share subscriptions and the offer price.

b)

2,750 million ordinary shares are to be allocated and offered, in whole or in part, by the way of
public offering, on one or several occasions. In this regard, the Executive Board or any persons
assigned by the Company’s executive board are granted the authority to determine the allocation
of offering rights, and all details and conditions in respect of the number of ordinary shares to be
offered in each occasion, the offer period, the payment of share subscriptions and the offer price.

On 15 May 2005, the Company registered its increased registered share capital with the Ministry of
Commerce to be a registered share capital of Baht 10,400 million, comprise of 10,400 million ordinary
shares of Baht 1 each.

Subsequent to 30 June 2005, an extraordinary general meeting of the Company’s shareholders passed
resolutions regarding the Company’s registered share capital, summarised as follows.
a)

Approved reductions of 300 million in the number of additional ordinary shares to be allotted
and offered to directors, management, and employees of the Company and 2,750 million
ordinary shares to be allotted and offered by the way of public offering, in order to comply with
the allocation of the Company’s share capital to the Mass Rapid Transit Authority of Thailand.

b)

Approved an increase of Baht 4,600 million in the Company’s registered share capital, from Baht
7,350 million to Baht 11,950 million, through the issuance of 4,600 million ordinary shares with
a par value of Baht 1 each. The allocation of the additional ordinary shares is to be as follows.

120

Annual Report 2005

1)

2,600 million ordinary shares are to be allocated and offered to the Mass Rapid Transit
Authority of Thailand at the price equivalent to par value of Baht 1 each.

2)

450 million ordinary shares are to be allocated and offered, in whole or in part, to
directors, management, and employees of the Company at the price equivalent to par value
of Baht 1 each. These may be offered on one or several occasions. Any ordinary shares
remaining after the allocation are to be allocated by means of public offerings. These
offers may be in Thailand and/or abroad and made on one or several occasions.
In this regard, the Executive Board or any persons assigned by the Company’s executive
board is granted the authority to determine the allocation of offering rights, and all details
and conditions in respect of the number of ordinary shares to be offered on each occasion,
the offer period, the payment of the share price and the offer price.

3)

1,550 million ordinary shares are to be allocated and offered to public. Any shares
remaining after this allocation are to be allocated, in whole or in part, by means of private
placement and/or to institutional investors, in accordance with the relevant Notifications of
the Securities and Exchange Commission, on one or several occasions.
In this regard, the Executive Board or any persons assigned by the Company’s Executive
Board are granted the authority to determine the allocation of offering rights, and all
details and conditions in respect of the number of ordinary shares to be offered on each
occasion, the offer period, the payment of the share price and the offer price.

On 1 July 2005, the Company registered the reduction of its registered share capital to Baht 7,350
million, comprising of 7,350 million ordinary shares of Baht 1 each, with the Ministry of Commerce,
as discussed in a) above.

On 4 July 2005, the Company registered the increase in its registered share capital to Baht 11,950
million, comprising of 11,950 million ordinary shares of Baht 1 each, with the Ministry of Commerce,
as discussed in b) above.

During December 2005, the Company’s directors, management and employees exercised their rights to
purchase 296,689,300 ordinary shares, as discussed in b) 2), at a price of Baht 1 per share, for a total of
Baht 296,689,300. The remaining 153,310,700 ordinary shares will be allocated by means of public
offerings, as granted resolution by the extraordinary general meeting of the Company’s shareholders.
On 11 January 2006, the Company registered the increase in its paid up share capital to Baht
7,646,689,300 comprising 7,646,689,300 ordinary shares with a par value of Baht 1 each, with the
Ministry of Commerce.

121

Annual Report 2005

The Company recorded proceeds of Baht 296,689,300 from the offering of the Company’s ordinary
shares to its directors, management and employee as “Share subscription received in advance” in the
balance sheet as at 31 December 2005.

14. FARE BOX COMPENSATION REVENUE
On 6 January 2005, the Company entered into a memorandum of agreement with the Mass Rapid
Transit Authority of Thailand (“the MRTA”) regarding the Company’s cooperation in the trial
discounting of the fare box rate of the MRTA Initial System Project - “Chaloem Ratchamongkhon
Line” stipulated in the Concession Agreement. The discounted fare box rates are to be effective during
the period 7 January 2005 to 31 March 2005. In return the MRTA agreed to pay compensation to the
Company at a rate of 80 percent of any shortfall between the actual fare box revenue and the standard
fare box revenue figure as stipulated in the memorandum of agreement. The Company recorded a fare
box compensation revenue of Baht 23.1 million as a revenue for the first quarter of current year.

On 20 May 2005, the Company received a letter from the MRTA regarding the period of the trial
discounting of the fare box rate of the MRTA Initial System. In the letter, the MRTA indicated that the
discount compensation period was to be suspended during the period of the accident when the MRT
system service was unable to run as normal. The MRTA also indicated that the discount compensation
period would then continue again from 21 March 2005 and would end on 4 June 2005.

Subsequently on 10 June 2005, the Company received another letter from the MRTA informing it that
the discount compensation to be paid to the Company was approximately Baht 20.5 million. The
Company has therefore adjusted the fare box compensation revenue to equivalent to the said amount.

15. FORWARD EXCHANGE CONTRACTS
As at 31 December 2005, the balance of the liabilities of the Company outstanding in foreign
currencies, net of foreign-currency denominated assets was 38.3 million yens and 2.0 million euro. The
Company does not utilise forward exchange contract to hedge against foreign exchange rate risk.

16. NUMBER OF EMPLOYEES AND RELATED COSTS

Number of employees at end of year (Persons)
Employee costs for the year (Thousand Baht)

Consolidated
2005
2004
1,022
940
298,240
265,838

The Company Only
2005
2004
928
872
272,044
244,138

122

Annual Report 2005

During the current year, the Company contributed Baht 5.9 million (2004 : Baht 4.8 million) to the
provident fund which is included in the above employee costs.

17. BANK GUARANTEES
As at 31 December 2005, there were outstanding bank guarantees issued by banks on behalf of the
Company as follows :
17.1 A bank guarantee of Baht 150 million (2004 : Baht 150 million) was issued to the MRTA in
respect of certain performance bonds required in the Concession Agreement.
17.2 Bank guarantees of Baht 32.4 million (2004 : Baht 32.4 million) was issued to the Metropolitan
Electricity Authority as certain performance bonds in respect of electricity meters instalation at
the power substations in the Depot area and Administration Building.

18. COMMITMENTS
As at 31 December 2005, the Company had commitments from the following agreements.
18.1 The Procurement of M&E Equipment contracts and the Maintenance of M&E Equipment and
Trackwork contracts for 10 years commencing from the Commercial Operation Date. Under the
contracts, the Company has outstanding commitments totaling of Baht 1,247 million and 33
million euros (2004 : Baht 1,657 million and 39 million euros) excluding escalation in
accordance with the general consumer price index.
18.2 The Company had commitments from a project management agreement with a joint venture as
the agreement dated 15 August 2000 and a supplemental agreement dated 18 March 2004. Under
the agreements, the Company has outstanding commitments in respect of project management
fee during 2006 to 2008 totaling of Baht 127 million excluding escalation in accordance with the
general consumer price index.
18.3 The Company had commitments from Contracts to repair and maintenance of infrastructure and
civil works of the MRTA Initial System Project - Chaloem Ratchamongkhon Line with a related
company and other 3 companies, totaling 5 contracts, under the contracts dated 6 November
2003 and 1 June 2004, for the period of 7 years. Under the contracts, the Company has
commitments to pay maintenance fees totaling Baht 1,061 million.
18.4 The Company had commitments from Contracts to repair and maintenance of retail area of the
MRTA Initial System Project - Chaloem Ratchamongkhon Line with 2 companies, under the
contracts dated 1 September 2005 and 14 October 2005, for the period of 5 years and 6 months
and 5 years and 4 months, respectively. Under the contracts, the Company has commitments to
pay maintenance fees totaling Baht 139 million.

123

Annual Report 2005

18.5 The Company had commitments from various services agreements, under which, the Company
has commitments in respect of service fees. Under the agreements, the Company has outstanding
commitments to pay related fees totaling of approximately Baht 21 million.
18.6 The subsidiaries had commitments in respect of car rental agreement, and rental of office
building agreements and related service agreements, under which, the subsidiaries have
outstanding commitments to pay rental and service fees totaling of approximately Baht 13.7
million.
18.7 The subsidiary had commitments in respect of agreements for construction and design of
infrastructure system of retail space in the underground stations totaling of approximately Baht
74 million.

19. LITIGATIONS
On 10 October 2002, Alstom Transport S.A. (the first plaintiff) and Alstom Holdings (Thailand)
Company Limited (the second plaintiff), as plaintiffs, filed a lawsuit against the Company with the
Intellectual Properties and International Trade Court, seeking damages of approximately Baht 1,382
million. In addition, on 16 December 2002, Mitsubishi Electric Corporation (the third plaintiff), as
plaintiff, filed a lawsuit against the Company with the Intellectual Properties and International Trade
Court, seeking damages amounting to approximately Baht 621 million. The amounts claimed are the
losses allegedly suffered by these companies as a result of the Companyâ&#x20AC;&#x2122;s changing the contractor for
procurement and maintenance of M&E Equipment and Trackwork for the MRTA Initial System Project
- Chaloem Ratchamongkhon Line, whereby the said companies had incurred costs in relation to their
performance of the Start-up Phase Works in accordance with the stipulations of the Memorandum of
Agreement dated 1 September 2000 made between the Company and the consortium formed by these
companies.

On 21 January 2003 and 28 January 2003, the Company filed defence testimony and countersuit with
the Intellectual Properties and International Trade Court in relation to the lawsuit brought by Alstom
Transport S.A. and Alstom Holdings (Thailand) Company Limited, as plaintiffs, and the lawsuit
brought by Mitsubishi Electric Corporation, as plaintiff, respectively, requesting that the Court dismiss
both cases and seeking damages from the plaintiffs totaling Baht 3,522 million.

On 8 July 2004, the Court had fixed a date of 28 September 2004 to allow the parties to try to
compromise. In addition, the Intellectual Properties and International Trade Court fixed dates of 8, 9
and 10 March 2005 in order to settle the issue of dispute.

124

Annual Report 2005

On 5 August 2004, Alstom Transport S.A. (the first plaintiff), Alstom Holdings (Thailand) Company
Limited (the second plaintiff) and the Company managed to agree a settlement to the dispute, whereby
the Company is not liable for any damages, and filed a petition with the Intellectual Properties and
International Trade Court to withdraw the lawsuits. The case with Mitsubishi Electric Corporation (the
third plaintiff) is still pending in Court and the Intellectual Properties and International Trade Court
fixed a further date on 3 December 2004 for the parties to try to compromise.

On 3 December 2004, the Company and Mitsubishi Electric Corporation (the third plaintiff) had
discussed in front of the mediator with a view to compromise, but the discussion was not concluded.
Subsequently on 26 April 2005, the parties again met in order to compromise, but the outcome of such
meeting was not positive. The Court then proceeds with the hearing and fixed the hearing date to be
done in October 2005.

Subsequently on 31 October 2005, the Company and Mitsubishi Electric Corporation (the third
plaintiff) managed to agree a settlement to the dispute, whereby the Company is not liable for any
damages, and Mitsubishi Electric Corporation (the third plaintiff) withdrew the lawsuit against the
Company and the Company withdrew the countersuit lodged against Mitsubishi Electric Corporation
(the third plaintiff) with the Intellectual Properties and International Trade Court. The Intellectual
Properties and International Trade Court, on the same date, granted its permission and disposed the case
from the Courtâ&#x20AC;&#x2122;s docket.

20. PROMOTIONAL PRIVILEGES
On 16 January 2003, the Company has been granted promotional privileges for the MRTA Initial
System Project - Chaloem Ratchamongkhon Line (the blue line) under the Investment Promotion Act
B.E. 2520, under BOI certificate number 1029(1)/2546. These privileges include a 100 percent
exemption from corporate income tax on net profit from promoted operations for a period of 8 years
commencing from the date of first earning operating income. The Company commenced its operations
on 3 July 2004. Subject to certain imposed conditions, the main privileges include the following :
-

Entitlement to 50% deduction of import duty on imported machinery according to specified
condition.

-

Exemption from corporate income tax on earnings from promotional privileges operation for a
period of eight years from the date on which operating income is first derived (in the year 2004).

125

Annual Report 2005

Net loss for the years ended 31 December 2005 and 2004 are divided into promoted and non-promoted
operations as follows :

21. FINANCIAL INFORMATION BY SEGMENT
The Companyâ&#x20AC;&#x2122;s and its subsidiariesâ&#x20AC;&#x2122; operations involve principally two industry segments; the
operation of the MRTA Initial System Project and commercial development, which comprises the rental
of retail space in the underground train stations, telecommunications services and provision of
advertising services in underground train stations. The operations of the Company and its subsidiaries
are carried on in the single geographic area of Thailand.

126

Annual Report 2005

The Company and its subsidiariesâ&#x20AC;&#x2122; financial information by segment of the operation of the MRTA
Initial System Project and commercial development business in the consolidated statements of earnings
for the years ended 31 December 2005 and 2004 is as follows :

The business segment information by segment of the operation of the MRTA Initial System Project and
commercial development business in the consolidated balance sheets as at 31 December 2005 and 2004
is as follows:

(Unit : Million Baht)

Project cost, net
Equipment, net
Other assets
Total assets

The MRTA
Initial System
Project
2005
2004
18,199 18,114
65
60

Commercial
Development
business
2005
2004
499
335
300
261

Total
2005
18,698
365

2004
18,449
321

Elimination
2005
2004
-

Total
2005
18,698
365
668
19,731

2004
18,449
321
536
19,306

127

Annual Report 2005

22. FINANCIAL INSTRUMENTS

22.1 Financial risk management and policies
The Company and its subsidiaries are exposed to risks from changes in market interest rates and
in currency exchange rates, and from nonperformance of contractual obligations by
counterparties. The Company and its subsidiaries do not hold or issue derivative instruments for
speculative or trading purposes.
22.2 Interest rate risk
The interest rate risk is the risk that future movements in market interest rates will affect the
results of the operations and its cash flows. The Company’s and its subsidiaries’ exposure to
interest rate risk relates primarily to its deposits with financial institutions and long-term loans
from financial institutions.

Since the majority of these financial assets are short-term and

interests on its long-term liabilities are charged at rates which closed to market interest rate, the
Company and its subsidiaries do not use derivative financial instruments to hedge such risk. The
details of loans are set out in Notes 10 and 11.
22.3 Foreign currency risk
The Company’s and its subsidiaries’ exposure to foreign currency risk relates primarily to their
payables which are dominated in foreign currencies. As the amounts of accounts payable are
immaterial, the Company and its subsidiaries do not use derivative financial instruments to hedge
such foreign exchange rate risk. The details of assets and liabilities denominated in foreign
currencies are set out in Note 15.
22.4 Fair value
Since the majority of the financial assets are short-term and that the loans carry interest at rates
close to market rates, the management believes that the Company’s and its subsidiaries’ fair
value of financial assets and liabilities do not materially differ from their carrying value.

128

Annual Report 2005

23. SUBSEQUENT EVENTS
On 1 February 1006, an extraordinary general meeting of the Company’s shareholders passed
resolutions regarding the Company’s registered share capital, summarised as follows.
23.1 Approved the cancellation of the resolution alloting 2,600 million additional ordinary shares for
offer to the Mass Rapid Transit Authority of Thailand.
23.2 Approved the cancellation of the allocation of the 153,310,700 remaining additional ordinary
shares to be offered to directors, management, and employees of the Company, and their
allocation to a public offering
23.3 Approved a reduction of 1,550 million in the number of additional ordinary shares to be allotted
and offered by the way of public offering.
23.4 Approved the allocation and offer of 1,315,810,700 ordinary shares by way of public offering.
Any shares remaining after this allocation are to be allocated, in whole or in part, by means of
private placement and/or to institutional investors, in accordance with the relevant Notifications
of the Securities and Exchange Commission, on one or several occasions.
In this regard, the Executive Board or any persons assigned by the Company’s Executive Board
are granted the authority to determine the allocation of offering rights, and all details and
conditions in respect of the number of ordinary shares to be offered on each occasion, the offer
period, the payment of the share price and the offer price.
23.5 Approved the allocation and offer of 2,987,500,000 ordinary shares to the Mass Rapid Transit
Authority of Thailand.

24. PRESENTATION
The presentation of the financial statements has been made in compliance with the stipulations of the
Notification of the Department of Business Development dated 14 September 2001, issued under the
Accounting Act B.E. 2543.

25. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were authorised for issue by the Board of Directors on 22 February 2006.

129

Annual Report 2005

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
REPORT AND INTERIM FINANCIAL STATEMENTS
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004

130

Annual Report 2005

Review Report of Independent Auditor
To The Board of Directors and Shareholders of
Bangkok Metro Public Company Limited

I have reviewed the accompanying consolidated balance sheet of Bangkok Metro Public Company Limited
and its subsidiaries as at 30 June 2005, the related consolidated statements of earnings for the three-month
and six-month periods ended 30 June 2005 and 2004, and the statements of changes in shareholders’ equity
and cash flows for the six-month periods ended 30 June 2005 and 2004 and the separate financial
statements of Bangkok Metro Public Company Limited for the same periods. These financial statements
are the responsibility of the Company’s and its subsidiaries’ management as to their correctness and the
completeness of the presentation. My responsibility is to issue a report on these financial statements based
on my reviews.
I conducted my reviews in accordance with the auditing standard applicable to review engagements. This
standard requires that I plan and perform the review to obtain moderate assurance as to whether the
financial statements are free of material misstatement. A review is limited primarily to inquiries of the
Company’s and its subsidiaries’ personnel and analytical procedures applied to financial data and thus
provides less assurance than an audit. I have not performed an audit and, accordingly, I do not express an
audit opinion.
Based on my reviews, nothing has come to my attention that causes me to believe that the accompanying
financial statements are not presented fairly, in all material respects, in accordance with generally accepted
accounting principles.
I have previously audited the consolidated financial statements of Bangkok Metro Public Company
Limited and its subsidiaries for the year ended 31 December 2004, and the separate financial statements of
Bangkok Metro Public Company Limited for the same year in accordance with generally accepted auditing
standards and expressed an unqualified opinion on those statements under my report dated 24 January
2005. The balance sheet as at 31 December 2004, as presented herein for comparative purposes, formed an
integral part of the financial statements which I audited and reported on. I have not performed any other
audit procedures subsequent to the date of that report.

30 June 2005 31 December 2004 30 June 2005 31 December 2004
(Unaudited
(Audited)
(Unaudited
(Audited)
but reviewed)
but reviewed)

10,400,000

7,350,000

10,400,000

7,350,000

7,350,000
600,052
(2,099,986)
5,850,066

7,250,000
400,052
169,609
(1,120,206)
6,699,455

7,350,000
600,052
(2,099,986)
5,850,066

7,250,000
400,052
169,609
(1,120,206)
6,699,455

8,376
5,858,442
19,209,928

21,089
6,720,544
19,305,648

5,850,066
18,942,052

6,699,455
19,043,705

The accompanying notes are an integral part of the financial statements.

134

Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
EARNINGS STATEMENTS
FOR THE THREE-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004
(Unit : Thousand Baht, except earnings per share expressed in Baht)

Transfer share subscription received in advance
to issued and paid up share capital (Note 8)

(169,609)

Net loss for the period

-

-

-

Minority interest of subsidiaries

-

-

-

Balance as at 30 June 2005

7,350,000

600,052

-

(979,780)
(2,099,986)

-

-

(979,780)

(12,713)

(12,713)

8,376

5,858,442

The accompanying notes are an integral part of the financial statements.

137

Annual Report 2005

(UNAUDITED BUT REVIEWED)
BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004
(Unit : Thousand Baht)

Issued and
paid-up
share capital

The Company Only
Share subscription
Share
received
premium
in advance

Deficit

6,404,836

-

-

Called up ordinary shares

395,164

-

-

-

395,164

Issuance of additional ordinary shares

250,000

-

-

-

250,000

-

-

-

(84,550)

(84,550)

Balance as at 30 June 2004

7,050,000

-

-

(247,545)

6,802,455

Balance as at 1 January 2005

7,250,000

400,052

(1,120,206)

6,699,455

43,464

86,927

56,536

113,073

Balance as at 1 January 2004

Net loss for the period

Issuance of additional ordinary shares (Note 8)

169,609
-

(162,995)

Total

-

6,241,841

130,391

Transfer share subscription received in advance
to issued and paid up share capital (Note 8)
Net loss for the period
Balance as at 30 June 2005

7,350,000

600,052

(169,609)

-

-

-

(979,780)

(979,780)

-

(2,099,986)

5,850,066

The accompanying notes are an integral part of the financial statements.

138

Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
CASH FLOWS STATEMENTS
FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004
(Unit : Thousand Baht)

Consolidated
2005

The Company Only

2004

2005

2004

Cash flows from (used in) operating activities
Net loss for the period

The accompanying notes are an integral part of the financial statements.

139

Annual Report 2005

(UNAUDITED BUT REVIEWED)

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
CASH FLOWS STATEMENTS (Continued)
FOR THE SIX-MONTH PERIODS ENDED 30 JUNE 2005 AND 2004
(Unit : Thousand Baht)

Consolidated
2005
Cash flows from (used in) investing activities
Increase in loans to subsidiary
Increase in investment in subsidiaries
Net cash payments for purchase of investment in subsidiar
Increase in equipment
(16,843)
Proceed from disposal of equipment
Increase in advance for construction - related party
Increase in advance for construction
Increase in project costs
(284,506)
Cash received from minority shareholders
3,080
Cash paid to minority shareholders
(14,500)
Net cash used in investing activities
(312,769)
Cash flows from (used in) financing activities
Increase in short-term loans from other company
12,720
Increase in long-term loans
149,000
Increase in long-term loans from shareholder
530,000
Cash received from called up ordinary shares
and additional ordinary shares
130,391
Net cash from financing activities
822,111
Net increase (decrease) in cash and cash equivalents
(238,632)
Cash and cash equivalents at beginning of period
343,923
Cash and cash equivalents at end of period
105,291
Supplemental cash flows information
Cash paid during the period for :
Interest expenses (included interest expenses which
capitalised to project costs)
365,670
Corporate income tax and withholding tax
deducted at source
604
The accompanying notes are an integral part of the financial statements.

BANGKOK METRO PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
30 JUNE 2005 AND 2004

1. GENERAL INFORMATION

1.1

General information of the Company
a)

On 1 August 2000, the Company entered into “Agreement for the MRTA Initial System
Project - Chaloem Ratchamongkhon Line” (“the Concession Agreement”) with the Mass
Rapid Transit Authority of Thailand (“the MRTA”) to design, manufacture, supply, install,
test and commission of the M&E Equipment and for the operation and maintenance of the
MRTA Initial System. The Agreement is for 25 years from the date that MRTA issues a
Notice of No Objection to Commencement of Revenue Service. The MRTA Initial System
was officially opened on 3 July 2004.
Under the Agreement, the Company has certain commitments to make payment of
remunerations to the MRTA which consist of remuneration from fares, remuneration from
commercial development, apportion of profit calculated from the Return on Equity (ROE)
and any benefit from the interest rate on a credit agreement which lower than the specified
rate, at the rate as mentioned in the Agreement. Furthermore, the Agreement stipulates the
maintenance of the proportion of shareholding of the main shareholders and a fine in case
that the Project was delayed.

b)

On 19 December 2001 the Company entered into a long-term loan agreement with a group
of domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement). The
loan agreement, which was amended by the first, the second and the third supplemental
agreements dated 27 January 2003 and 18 June 2003, 2 April 2004 and 30 July 2004,
respectively, provides the following 5 credit facilities :
1)

Tranche A Facility : A long-term loan facility of Baht 11,000 million for use in the
payment of project costs.

2)

Tranche B Facility : A performance guarantee facility of Baht 150 million provided
to guarantee the Company’s obligations to the MRTA under the Concession
Agreement.

3)

Tranche C Facility : A performance guarantee facility of Baht 60 million provided to
guarantee the Company’s obligations to the relevant authorities in relation to the
Project.

141

Annual Report 2005

(UNAUDITED BUT REVIEWED)

4)

Tranche D Facility : A long-term loan facility of Baht 500 million for use in the
payment of additional costs incurred as a result of the programme to accelerate the
procurement of M&E equipment and the depot modification.

5)

Tranche E Facility : A long-term loan facility of Baht 790 million for use in the
payment of additional expenses incurred under the M&E Equipment Contracts,
additional fees incurred under the Project Management Agreement, basic
infrastructure works for the retail areas in relation to the Commercial Development,
additional equipments in stations, mobilization fees for the Civil Infrastructure
maintenance contracts and investment in the Commercial Development Subsidiaries.
Subsequently, the Company and the lenders agreed to reduce the loan facility to
Baht 650 million.

1.2

Basis for preparation of interim financial statements
These interim financial statements are prepared in accordance with Accounting Standards
Pronouncement No. 41 “Interim financial statements”, with the Company choosing to present
condensed interim financial statements. However, additional line items are presented in the
balance sheets and the statements of earnings, changes in shareholders’ equity and cash flows to
bring them into line with the full format used in the annual financial statements.
The interim financial statements are intended to provide information additional to that included
in the latest annual financial statements. Accordingly, they focus on new activities, events, and
circumstances so as not to duplicate information previously reported. These interim financial
statements should therefore be read in conjunction with the latest annual financial statements.

1.3

Basis of consolidation
These consolidated financial statements have been prepared on the same basis as that applied for
the consolidated financial statements for the year ended 31 December 2004. There have been no
changes in the composition of the Group during the current period.

1.4

Significant accounting policies
The interim financial statements are prepared using the same accounting policies and methods of
computation as were used for the financial statements for the year ended 31 December 2004.

2. CASH AND CASH EQUIVALENTS
The Company has pledged its rights to receive deposits from bank accounts, which have outstanding
balances as at 30 June 2005 of approximately Baht 78.8 million (31 December 2004 : Baht 273.6
million) to a group of lenders to secure the Company’s long-term loans from the group of lenders.

BMCL Network Limited (Formerly known as “Radianz Communications Network Limited”)
In February 2005, the Company purchased 1,249,998 ordinary shares of BMCL Network Limited, at
par value of Baht 10 each, a total of Baht 12,499,980, from other shareholders, increasing the
Company’s total investment in that company to 100 percent of its share capital.

143

Annual Report 2005

(UNAUDITED BUT REVIEWED)

Triads Networks Company Limited
In March 2005, Triads Networks Company Limited called up 75 percent of its share capital 39,200
ordinary shares, totaling of Baht 2,940,000.

Metro Mall Development Limited
In May 2005, the Company purchased 200,000 ordinary shares of Metro Mall Development Limited, at
par value of Baht 10 each, a total of Baht 2,000,000, from other shareholder, increasing the Company’s
total investment in that company to 64 percent of its share capital.
The Company has pledged certain part of share certificates of investments in these three subsidiaries
with a group of lenders to secure the Company’s long-term loans from the group of lenders.

M&E Equipment and depot building and administration building will be transferred to the Mass Rapid
Transit Authority of Thailand after the end of concession agreement, of 25 years, on an Acquire
Operate and Transfer basis.
The Company has assigned the Project’s M&E Equipment, depot building and administration building
to a group of lenders to secure the Company’s long-term loans from the group of lenders.

144

Annual Report 2005

(UNAUDITED BUT REVIEWED)

5. LONG-TERM LOANS/CURRENT PORTION OF LONG-TERM LOANS
On 19 December 2001, the Company entered into a long-term loan agreement with a group of
domestic lenders formed by 4 commercial banks (Onshore Facilities Agreement) to obtain a loan
facility of Baht 11,000 million used in the payment of project costs. The loan facilities carry interest at
7.75 percent per annum for the first 2 years from the date of the agreement, and thereafter at MLR plus
0.25 percent per annum until the Project Completion Date, and at MLR per annum after the Project
Completion Date. The loans are scheduled for repayment on an instalment basis commencing March
2006 and the last instalment in December 2016.

Subsequently, on 18 June 2003, the Company entered into a supplemental agreement to the Onshore
Facilities Agreement to obtain an additional loan facility of Baht 500 million used in the payment of
additional costs incurred as a result of the programme to accelerate the procurement of M&E
equipment and depot modification. The loan carries interest at MLR plus 0.25 percent per annum until
the Project Completion Date, and at MLR per annum after the Project Completion Date. The loan is
scheduled for repayment in a single lump sum in June 2017.

Subsequently on 2 April 2004, the Company entered into a supplemental agreement to the Onshore
Facilities Agreement (No.3), under which the loan facility was increased by addition of the Tranche E
Facility of Baht 790 million and subsequently on 30 July 2004, the Company and the lenders agreed to
reduce the loan facility to Baht 650 million. This is to be used for payment of additional expenses
incurred under the M&E Equipment Contracts, additional fees incurred under the Project Management
Agreement, basic infrastructure works for the retail areas in relation to the Commercial Development,
additional equipments in stations, mobilization fees for the Civil Infrastructure maintenance contracts
and investment in the Commercial Development Subsidiaries. The loan facility carries interest at MLR
plus 0.5 percent per annum. The loan is scheduled for repayment in a single lump sum in June 2017.
The loans are secured by the mortgages of the Project’s M&E Equipment, depot building and
administration building, pledges of the Company’s share certificates, share certificates of investments
in subsidiaries, sponsors support, and the assignment of rights and obligations under the Concession
Agreement and the rights to receive deposits in bank accounts.

The loan agreement included covenants imposed by the lenders on, among other things, the proportion
of shareholding of the principal shareholders, changes of the Company’s management, entering into
other loan agreements, entering into any new business or activity which is not related to the Project and
the maintenance of certain financial ratios.

145

Annual Report 2005

(UNAUDITED BUT REVIEWED)

6. LONG-TERM LOANS FROM SHAREHOLDER AND ACCRUED INTEREST
On 11 March 2005 and 27 May 2005, the Company entered into two subordinated loans agreements
with a shareholder, under which they were granted long-term loans facilities of Baht 380 million and
Baht 150 million, respectively. The loans carry interest at MLR plus 0.5 percent per annum and
principal and interest are to be paid after the Company has paid all indebtedness under the Onshore
Facilities Agreementnt (as discussed in Note 5).

7. RELATED PARTY TRANSACTIONS
During the periods, the Company and its subsidiaries had significant business transactions with related
parties (related by the way of shareholding or common shareholders and/or common directors). Such
transactions, which have been concluded on the terms and basis as determined by the Company, its
subsidiaries and those related parties, are under the normal course of business of the Company and its
subsidiaries. The transactions are summarised below :

(Unit : Million Baht)

Project construction costs
Project maintenance costs
Project management fees
- Included as part of
project costs
- Included as part of
costs of fare box

For the three-month periods ended 30 June
The Company Only
Consolidated
2005
2004
2005
2004
3.0
3.0
2.9
2.9
-

Pricing policy
Based on contract
Based on contract

-

39.3

-

39.3

Based on contract

16.0

-

16.0

-

Based on contract

146

Annual Report 2005

(UNAUDITED BUT REVIEWED)

(Unit : Million Baht)

Selling and administrative
expenses
Interest expense and related fee
- Included as part of
project costs
- Included as part of selling
and administrative expenses

For the three-month periods ended 30 June
The Company Only
Consolidated
2005
2004
2005
2004
1.6
0.3
0.3

Pricing policy
Agreed between
parties

-

67.1

-

67.1

Based on contract

82.7

-

79.4

-

Based on contract

(Unit : Million Baht)

Project construction costs
Project maintenance costs
Project management fees
- Included as part of
project costs
- Included as part of
costs of fare box
Selling and administrative
expenses
Interest expense and related fee
- Included as part of
project costs
- Included as part of selling
and administrative expenses

For the six-month periods ended 30 June
The Company Only
Consolidated
2005
2004
2005
2004
10.5
10.5
5.0
5.0
-

Pricing policy
Based on contract
Based on contract

-

88.6

-

88.6

Based on contract

35.3

-

35.3

-

Based on contract

0.7

-

0.7

Agreed between
parties

-

131.5

-

131.5

Based on contract

158.6

-

152.2

-

Based on contract

3.2

147

Annual Report 2005

(UNAUDITED BUT REVIEWED)

The outstanding balances of the above transactions are shown as separate items and part of items in the
balance sheet as follows :

(Unit : Thousand Baht)
The Company Only
31 December
2004
Part of “Long-term loans”
- Krungthai Bank Public Company Limited
Current Portion
Long-term portion

4,657,869

Increase

Decrease

21,500

-

58,244

(21,500)

30 June
2005

21,500
4,694,613

8. SHARE CAPITAL
During the fourth quarter of 2004, through a share offering the Company allocated 56,536,246
additional ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of
Baht 169.6 million. The Company presented this amount as a “Share subscription received in advance”
in the balance sheet as at 31 December 2004. Subsequently on 14 January 2005, the Company
registered the above paid up share capital with the Ministry of Commerce.

During the current quarter, through a share offering the Company allocated 43,463,754 additional
ordinary shares to its existing shareholders at a price of Baht 3 per share, making a total of Baht 130.4
million. The Company registered the above paid up share capital with the Ministry of Commerce on 1
March 2005 to be a paid up share capital of Baht 7,350 million, comprises of 7,350 million ordinary
shares of Baht 1 each.

On 29 April 2005, the Annual General Meeting of the Company’s shareholders passed resolution to
increase the Company’s registered share capital from Baht 7,350 million to Baht 10,400 million
through the issuance of 3,050 ordinary shares with a par value of Baht 1 each, to be allocated at the
following basis.
a) 300 million ordinary shares are to be allocated and offered, in whole or in part, to directors,
management, and employees of the Company. These may be made on one or several occasions.
Any ordinary shares remaining after the allocation are to be allocated by means of public offerings.
These offers may be in Thailand and/or abroad and made on one or several occasions. In this
regard, the Executive Board or any persons assigned by the Company’s executive board are
granted the authority to determine the allocation of offering rights, and all details and conditions in
respect of the number of ordinary shares to be offered in each occasion, the offer period, the
payment of share subscriptions and the offer price.

151

Annual Report 2005

(UNAUDITED BUT REVIEWED)

b)

2,750 million ordinary shares are to be allocated and offered, in whole or in part, by the way of
public offering, on one or several occasions. In this regard, the Executive Board or any persons
assigned by the Company’s executive board are granted the authority to determine the allocation
of offering rights, and all details and conditions in respect of the number of ordinary shares to be
offered in each occasion, the offer period, the payment of share subscriptions and the offer price.

On 15 May 2005, the Company registered its increased registered share capital with the Ministry of
Commerce to be a registered share capital of Baht 10,400 million, comprise of 10,400 million ordinary
shares of Baht 1 each.

Subsequent to 30 June 2005, an extraordinary general meeting of the Company’s shareholders passed
resolutions regarding the Company’s registered share capital, summarised as follows.
a)

Approved reductions of 300 million in the number of additional ordinary shares to be allotted
and offered to directors, management, and employees of the Company and 2,750 million
ordinary shares to be allotted and offered by the way of public offering, in order to comply with
the allocation of the Company’s share capital to the Mass Rapid Transit Authority of Thailand.

b)

Approved an increase of Baht 4,600 million in the Company’s registered share capital, from Baht
7,350 million to Baht 11,950 million, through the issuance of 4,600 million ordinary shares with
a par value of Baht 1 each. The allocation of the additional ordinary shares is to be as follows.
1)

2,600 million ordinary shares are to be allocated and offered to the Mass Rapid Transit
Authority of Thailand at the price equivalent to par value of Baht 1 each.

2)

450 million ordinary shares are to be allocated and offered, in whole or in part, to
directors, management, and employees of the Company. These may be offered on one or
several occasions. Any ordinary shares remaining after the allocation are to be allocated by
means of public offerings. These offers may be in Thailand and/or abroad and made on one
or several occasions.
In this regard, the Executive Board or any persons assigned by the Company’s executive
board is granted the authority to determine the allocation of offering rights, and all details
and conditions in respect of the number of ordinary shares to be offered on each occasion,
the offer period, the payment of the share price and the offer price.

152

Annual Report 2005

(UNAUDITED BUT REVIEWED)

3)

1,550 million ordinary shares are to be allocated and offered to public. Any shares
remaining after this allocation are to be allocated, in whole or in part, by means of private
placement and/or to institutional investors, in accordance with the relevant Notifications of
the Securities and Exchange Commission, on one or several occasions.
In this regard, the Executive Board or any persons assigned by the Company’s Executive
Board are granted the authority to determine the allocation of offering rights, and all
details and conditions in respect of the number of ordinary shares to be offered on each
occasion, the offer period, the payment of the share price and the offer price.

On 1 July 2005, the Company registered the reduction of its registered share capital to Baht 7,350
million, comprising of 7,350 million ordinary shares of Baht 1 each, with the Ministry of Commerce,
as discussed in a) above.

On 4 July 2005, the Company registered the increase in its registered share capital to Baht 11,950
million, comprising of 11,950 million ordinary shares of Baht 1 each, with the Ministry of Commerce,
as discussed in b) above.

9. FARE BOX COMPENSATION REVENUE
On 6 January 2005, the Company entered into a memorandum of agreement with the Mass Rapid
Transit Authority of Thailand (“the MRTA”) regarding the Company’s cooperation in the trial
discounting of the fare box rate of the MRTA Initial System Project - “Chaloem Ratchamongkhon
Line” stipulated in the Concession Agreement. The discounted fare box rates are to be effective during
the period 7 January 2005 to 31 March 2005. In return the MRTA agreed to pay compensation to the
Company at a rate of 80 percent of any shortfall between the actual fare box revenue and the standard
fare box revenue figure as stipulated in the memorandum of agreement.
On 20 May 2005, the Company received a letter from the MRTA regarding the period of the trial
discounting of the fare box rate of the MRTA Initial System. In the letter, the MRTA indicated that the
discount compensation period was to be suspended during the period of the accident when the MRT
system service was unable to run as normal. The MRTA also indicated that the discount compensation
period would then continue again from 21 March 2005 and would end on 4 June 2005.

153

Annual Report 2005

(UNAUDITED BUT REVIEWED)

Subsequently on 10 June 2005, the Company received another letter from the MRTA informing it that
the discount compensation to be paid to the Company was approximately Baht 20.5 million. The
Company therefore adjusted the fare box compensation revenue to the said amount, resulting in the
reversal of Baht 2.6 million of fare box compensation revenue which had been over recorded in the
first quarter of current year.

10. FORWARD EXCHANGE CONTRACTS
As at 30 June 2005, the balance of the liabilities of the Company outstanding in foreign currencies, net
of foreign-currency denominated assets was 1.0 million euro. The Company does not utilise forward
exchange contract to hedge against foreign exchange rate risk.

11. BANK GUARANTEES
As at 30 June 2005, there were outstanding bank guarantees issued by banks on behalf of the Company
as follows :
11.1 A bank guarantee of Baht 150 million (31 December 2004 : Baht 150 million) was issued to the
MRTA in respect of certain performance bonds required in the Concession Agreement.
11.2 Bank guarantees of Baht 32.4 million (31 December 2004 : Baht 32.4 million) was issued to the
Metropolitan Electricity Authority as certain performance bonds in respect of electricity meters
instalation at the power substations in the Depot area, Administration Building and retail area in
underground stations.
12. COMMITMENTS
As at 30 June 2005, the Company and its subsidiaries had commitments from the following
agreements.
12.1 The Procurement of M&E Equipment contracts and the Maintenance of M&E Equipment and
Trackwork contracts for 10 years commencing from the Commercial Operation Date. Under the
contracts, the Company has outstanding commitments totaling of Baht 1,322 Million and 36
million euros (31 December 2004 : Baht 1,657 million and 39 million euros) excluding
escalation in accordance with the general consumer price index.
12.2 The Company had commitments from a project management agreement with a joint venture as
the agreement dated 15 August 2000 and a supplemental agreement dated 18 March 2004. Under
the agreements, the Company has outstanding commitments in respect of project management
fee during 2005 to 2008 totaling of Baht 152 million excluding escalation in accordance with the
general consumer price index.

154

Annual Report 2005

(UNAUDITED BUT REVIEWED)

12.3 The Company had commitments from Contracts to repair and maintenance of infrastructure and
civil works of the MRTA Initial System Project - Chaloem Ratchamongkhon Line with a related
company and other 3 companies, under the contracts dated 6 November 2003 and 1 June 2004,
for the period of 7 years. Under the contracts, the Company has commitments to pay
maintenance fees totaling Baht 1,145 million.
12.4 The Company had commitments from various services agreements, under which, the Company
has commitments in respect of service fees. Under the agreements, the Company has outstanding
commitments to pay related fees totaling of approximately Baht 41 million.
12.5 The Company had commitments from policies provide all risks insurance for loss incurred
during installation and testing of M&E Equipment, including delays resulting from damage
incurred and third party liability; as well as marine insurance for M&E Equipment. Under the
insurance policies, the Company has commitments to pay the premium totaling of approximately
0.2 million euro.
12.6 The subsidiaries had commitments in respect of car rental agreement, and rental of office
building agreements and related service agreements, under which, the subsidiaries have
outstanding commitments to pay rental and service fees totaling of approximately Baht 19
million.
12.7 The subsidiary had commitments in respect of agreements for construction and design of
infrastructure system of retail space in the underground stations totaling of approximately Baht
89 million.

13. LITIGATIONS
On 10 October 2002, Alstom Transport S.A. (the first plaintiff) and Alstom Holdings (Thailand)
Company Limited (the second plaintiff), as plaintiffs, filed a lawsuit against the Company with the
Intellectual Properties and International Trade Court, seeking damages of approximately Baht 1,382
million. In addition, on 16 December 2002, Mitsubishi Electric Corporation (the third plaintiff), as
plaintiff, filed a lawsuit against the Company with the Intellectual Properties and International Trade
Court, seeking damages amounting to approximately Baht 621 million. The amounts claimed are the
losses allegedly suffered by these companies as a result of the Companyâ&#x20AC;&#x2122;s changing the contractor for
procurement and maintenance of M&E Equipment and Trackwork for the MRTA Initial System
Project - Chaloem Ratchamongkhon Line, whereby the said companies had incurred costs in relation
to their performance of the Start-up Phase Works in accordance with the stipulations of the
Memorandum of Agreement dated 1 September 2000 made between the Company and the consortium
formed by these companies.

155

Annual Report 2005

(UNAUDITED BUT REVIEWED)

On 21 January 2003 and 28 January 2003, the Company filed defence testimony and countersuit with
the Intellectual Properties and International Trade Court in relation to the lawsuit brought by Alstom
Transport S.A. and Alstom Holdings (Thailand) Company Limited, as plaintiffs, and the lawsuit
brought by Mitsubishi Electric Corporation, as plaintiff, respectively, requesting that the Court
dismiss both cases and seeking damages from the plaintiffs totaling Baht 3,522 million.

On 8 July 2004, the Court had fixed a date of 28 September 2004 to allow the parties to try to
compromise. In addition, the Intellectual Properties and International Trade Court fixed dates of 8, 9
and 10 March 2005 in order to settle the issue of dispute.

On 5 August 2004, Alstom Transport S.A. (the first plaintiff), Alstom Holdings (Thailand) Company
Limited (the second plaintiff) and the Company reached a compromise on the dispute and filed a
petition with the Intellectual Properties and International Trade Court to withdraw the lawsuits,
without causing the Company to be liable. The case with Mitsubishi Electric Corporation (the third
plaintiff) is still pending in Court and the Intellectual Properties and International Trade Court fixed a
further date on 3 December 2004 for the parties to try to compromise.

On 3 December 2004, the Company and Mitsubishi Electric Corporation (the third plaintiff) had
discussed in front of the mediator with a view to compromise, but the discussion was not concluded.

Subsequently on 26 April 2005, the parties again met in order to compromise, but the outcome of
such meeting was not positive. The Court then proceed with the hearing and fixed the hearing date to
be done in October 2005.

However, the Companyâ&#x20AC;&#x2122;s management believes that the Company still has a good chance to
successfully defend its cases claimed by Mitsubishi Electric Corporation (the third plaintiff) and does
not expect that the Company will have to compensate the plaintiff for any losses as a result of the
lawsuits.

156

Annual Report 2005

(UNAUDITED BUT REVIEWED)

14. PROMOTIONAL PRIVILEGES
On 16 January 2003, the Company has been granted promotional privileges for the MRTA Initial
System Project - Chaloem Ratchamongkhon Line (the blue line) under the Investment Promotion Act
B.E. 2520, under BOI certificate number 1029(1)/2546. These privileges include a 100 percent
exemption from corporate income tax on net profit from promoted operations for a period of 8 years
commencing from the date of first earning operating income. The Company commenced its operations
on 3 July 2004. Subject to certain imposed conditions, the main privileges include the following :
-

Entitlement to 50% deduction of import duty on imported machinery according to specified
condition.

-

Exemption from corporate income tax on earnings from promotional privileges operation for a
period of eight years from the date on which operating income is first derived.

15. FINANCIAL INFORMATION BY SEGMENT
The Company’s and its subsidiaries’ operations involve principally two industry segments; the
operation of the MRTA Initial System Project and commercial development, which comprises the rental
of retail space in the underground train stations, telecommunications services and provision of
advertising services in underground train stations. The operations of the Company and its subsidiaries
are carried on in the single geographic area of Thailand, and since the operating results of the
subsidiaries which conduct commercial development business are immaterial to the consolidated
financial statements during the current period, there is no presentation of financial statements
information by industry segment.

16. APPROVAL OF INTERIM FINANCIAL STATEMENTS
These interim financial statements have been approved by the Company’s directors.